We’ve been talking about if for a while now, but the evidence has really started to mount over the last few days. What’s that? Sector rotation, where yesterday’s leaders are replaced by tomorrow’s leaders.

Though it’s an ongoing (and trade-worthy) phenomenon, new leaders become readily apparent during and immediately after corrections like the one we went through last month. The hot spots over the thirteen months prior to that point look nothing like the leaders we’ve seen since the May 20th bottom. (And yes, we know the market’s been lower since then, but May 20th - so far - was the sentiment-capitulatory bottom.)

Take a look at what led and lagged between the March-2009 bottom and the April-2010 top…

… and now compare that to the leaders since the May 20th bottom….

Most of the leaders are now laggards, and most of the laggards are now leaders. Basic materials is an exception, though not a surprising one given that gold and other precious metals fall into that category. Had it not been for gold, the basic materials sector wouldn’t have been quite as impressive for the last few weeks (though still a better-than-average performer).

If you’re more of a numbers person, or want the details, we’ve got those too. Again though, the leadership shake-up is evident.

So is this volatility, or a trend?

Given the environment and length of time that we’ve watched these charts unfold, this can’t really be chalked up to volatility. Investors were thinking aggressively a year ago, explaining why they favored the sectors they did then. With the fear of a double-dip recession as a backdrop now though, investors are understandably looking at (and for) safer areas. That kind of mentality isn’t quick to fade away either, so, these are ‘trends’ until further notice. As such, these charts should be somewhere in the thought process as you select new stocks going forward.

You could live to be a million years old and you’d never see this kind of chart or advice on CNBC, or read about it in the Wall Street Journal…. despite the fact it’s a huge help to your portfolio. Stop missing out on the good stuff - subscribe to the free Micro Cap Press newsletter today.