The overall pace of outperformance is moderating, but the cyclical trade is still looking pretty healthy here. Defensive sectors got a bit of a surprise in terms of outperforming the market, but I suspect this week’s Fed announcement could halt short-term progress. Defensive sectors aren’t giving up here.

Energy stocks were again the market’s top performing sector last week despite some pressures on oil prices. Defensive sectors across the board were significant underperformers last week and this group was not spared. The next few weeks for staples stocks could be a referendum on the health of the consumer.

Energy stocks remain a leader in this market and they’re starting to get some assistance from other cyclical sectors. This is the first notable uptick we’ve seen in the lumber/gold ratio since early August. Even though the dollar index continues to push higher, I still maintain that this can’t last much longer. A sustained rally for Treasuries may still be a few months away.