Sector Rotation
Technology Starting to Look Weak
One of the hallmarks of a bull market is sector rotation. I am sending out this update because we are starting to see the early signs of money moving out of technology, which has led this year’s market rally, and into lagging sectors/industry groups.
Below is a weekly chart of the Nasdaq 100 and last week’s candle is called a shooting star, a loss of momentum candle that suggests a possible change in trend.
Negative Momentum
Below is a daily chart of the Nasdaq 100 with the MACD (momentum) indicator in the lower panel. The MACD has rolled over and is displaying a negative divergence with the price chart. This all suggests the odds of a pullback in the index is elevated in the near term.
Sectors On The Move
Energy
Below is a chart of the Energy Sector ETF (XLE) in the upper panel and the MACD in the lower panel.
XLE has advanced above its downtrend line, retraced to that line, and advanced to a new short-term high. Additionally, the MACD has crossed above zero and is above its moving average.
Healthcare Sector
The Healthcare Sector (XLV) has advanced above its downtrend line and its MACD is advancing above its moving average.
Utility Sector
The Utilities Sector (XLU) has advanced above its downtrend line and its MACD is advancing above its moving average.
Commodity Index
Below is a chart of the Commodity Index ETF (DBC) and like the charts above, it has broken out of a downtrend with positive momentum.
Client Account Update
Over the past few weeks, I have added holdings in those sectors that are showing signs of strength and recently shorted market indexes (mainly the Nasdaq 100) as a hedge.
I will continue to rebalance client accounts based on our ongoing analysis of market technicals.
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