If I told you that the four sectors with the most potential to undergo a secular trend change are semiconductors, housing, retail, and airlines you would probably say "wow". Certainly, that would be a good broad base rally to get excited about if these sectors could provide leadership. Of course, there is the current dynamic of an overbought market within the context of a longer term bear market, but I believe that these sectors are setting up to be the next bull market leaders.

Semiconductors

I first mentioned the semiconductor sector in the article, "Semiconductor Sector: Potential For Secular Run", back on March 20, 2009. At that time I stated:

"I like to seek out assets or sectors where the secular winds will propel prices higher. In other words, I am looking for the "next big thing", and the semiconductor sector would qualify. From a technical perspective, this sector has all the right attributes to undergo a prolong run."

I went on to say:

"The technical evidence suggests that "the bottom" is in for semiconductors."

Figure 1 is a monthly chart of the Philadelphia Semiconductor Sector Index (symbol: $SOX). The "next big thing" indicator is in the lower panel, and we can see it is in the zone where a secular trend change is typically launched from. A monthly close over the simple 10 month moving average within the context of a new bull market would be a very positive development.

Figure 1. $SOX/ monthly

Housing

Figure 2 is a monthly chart of the Philadelphia Housing Sector Index (symbol: $HGX). Once again, the "next big thing" indicator is in the lower panel, and it is in the "zone". The housing index broke below the lower blue trend line back in October, 2008, but in the past 2 months this trend line was recaptured; this is bullish. Confirmation of higher prices would come on a monthly close over the black trend line or the 10 month moving average especially if the broader market is in bullish mode.

Figure 2. $HGX/ monthly

Retail

Figure 3 is a monthly chart of the CBOE S&P Retail Index (symbol: $RLX.X) with the "next big thing" indicator in the lower panel. It seems very likely that the retail sector index will close the month over its simple 10 month moving average, and I would view this as a bullish development provided the overall market winds are favorable.

Figure 3. $RLX.X/ monthly

Airlines

Figure 4 is a monthly chart of the AMEX Airline Index (symbol: $XAL.X) with the "next big thing" indicator in the lower panel. The price action has been bullish from two perspectives: 1) it seems likely that price will close the month above the down sloping, dashed trend line; and 2) this will be a close above a prior pivot low point (noted with red arrows). Closes below a pivot or a trend line that quickly reverse are bullish.

Figure 4. $XAL.X/ monthly

So let's summarize.

I have given the case for intermediate term bearishness starting next week.

Today I have presented 4 sectors that might be leaders in the next bullish run; certainly, having the overall market move higher would be a necessary tailwind to the development of these secular stories.