Trader Talk

Markets oversold, but these leaders are still holding up

Traders work on the floor of the New York Stock Exchange.
Getty Images

A positive start to the trading day, and boy do we need it. We are in some very rare oversold territory. Consider:

1) The S&P 500 has dropped five days in a row. It's the first five-day losing streak since January, but before that, the last five-day losing streak was December 2013;

2) The S&P 500 materials sector is down nine days in a row, which hasn't happened since May 2012;

3) The NYSE Advance/Decline line has declined seven days in a row, an equally rare event. The NYSE Composite Index has also been down seven days in a row.

4) There were 467 new lows on the NYSE, or nearly one in five of the stocks, a very high number.

Read More Until this happens, keep buying stocks: Technician

Even though the S&P 500 is only 3 percent from its recent high, this decline in the Advance/Decline line indicates the leadership is becoming much more selective.

More than half of the S&P 500's 10 sectors are in decline this month.

Sector laggards in July:

This puts a lot of pressure on the remaining market leadership, specifically financials, health care, and technology.

Sector leaders in July:

Read MoreStreet picks: 8 stocks ready to pop on earnings

But the market is more selective than this. There is a lot of money hiding out in a few sub-groups: banks, biotech, and internet names like Google, Amazon, and Facebook. The ETFs associated with these sectors have seen much heavier volume in the last couple months.

Sub-sector leaders in July:

The good news is none of these are showing signs of serious deterioration, though they have dropped along with the rest of the market in the last few days, and Biogen's disappointment is a bit of a red flag in biotech.