A couple months ago I started noticing significant distortions between and among sectors and various asset classes.

As a result, in early June I started penning articles warning that a stock crash was in the cards this summer. [Summer Crash of 2011?]

Make no mistake — we have experienced a crash in stocks. But we don’t know if it’s truly over or not.

The crash of 1987 took the Dow Jones Industrial Average back to levels not seen since nine months prior. The summer crash of 2011 has taken the S&P 500 to levels not seen in 10 months.

There are two important sectors now to pay attention to. Since the March low in 2009, the main drivers of the equity bull market were industrials and consumer discretionary. They significantly outperformed broader averages since the liquidity-induced recovery began.

However, a break in leadership in industrials and early shift out of discretionary stocks appears to be occurring. Below are the price ratios comparing the industrials and consumer discretionary sectors to the broader market. As a reminder, a rising price ratio means the numerator/sector is outperforming (up more/down less) the denominator/S&P 500.

Industrials — Don’t Cry for Me

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