EC Sector Watch: Most Sectors Remain Solidly In The Bull's Camp

Sectors as a whole remain bullish, despite recent market pullback. 

The two sectors that I like the least are the financials and the materials. Both of them look problematic, and the financials are showing more weakness today, despite already being oversold. 

Now, I find the energy sector incredibly interesting, not so much because I am tempted to gobble up the energy stocks, but because, there is a clear topping pattern at play here, but it manages to save the bulls from any kind of confirmation each time when it is staring over the edge of the cliff. That is exactly what we have seen over the last two days as well. So far it is holding, but I'm not sure it will last. 

Finally there are a few sectors consolidating and waiting for its next move higher - so if you are looking to play those sectors below, then be patient and let confirmations play out first before front running any potential moves higher or lower. 

As for the top three right now, Technology could have been included in the top three, and remains a solid chart, however, the strength in industrials lately, along with healthcare still trading at their highs, and a stronger bounce in discretionary, kept tech out. 

Here's what I see as the top 3 sectors right now:

  1. Healthcare
  2. Industrials
  3. Discretionary

The 3 worse sectors are:

  1. Financials 
  2. Materials
  3. Energy

Financials, even though they are in the bottom three, isn't all that bad, it simply just isn't where the others are that this juncture. 

Let's review the sectors:

Basic Materials (XLB)

xlb 1

Energy (XLE)

xle 1

Financials (XLF

xlf 1

Industrials (XLI)

xli 1

Technology (XLK)

xlk 1

Consumer Staples (XLP)

xlp 1

Utilities (XLU)

xlu 1

Health Care (XLV)

xlv 1

Consumer Disretionary (XLY)

xly 1

Click here to download my Allocation Spreadsheet.

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Moon Kil Woong 2 months ago Contributor's comment

What is affecting the market right now is tech and semiconductors. Tech was helping carry the market higher, but with the Republicans attacking the Internet and threatening regulations which goes against Trumps deregulation and core Republican anti-regulatory beliefs it is no wonder tech has faltered. As for semiconductors, the real issue is that to fuel growth in this area recently semiconductor players are stepping on each others feet to grow. The cycle does seem a bit tired and open warfare is inevitable. Until the losers are known, semis are liable to keep hurting until someone is flushed out.

For materials and energy, the continued worry over trade wars lingers. Thus this lack of upward momentum is 100% generated from Washington and nothing more. For those wondering what Republicans are doing, join the crowd. Their anti-free market, anti-free trade, pro-tech regulatory message is confusing Republicans and seems to be implying they need someone to check their worst inclinations as well. It is strange that Democrats are the only viable counter to their recent actions. I guess in Washington often gridlock is better than people pressing absurd ideas onto the market.

We need a party that believes in capitalism. Apparently the Republican party has also given up on this and may be why they will loose in the next election. A vote for Democrats seems more a vote for stability and do nothing in Washington than anything else at this point in time.