Despite the massive gains we've already seen this year... the market is still soaring. In the past month alone, the S&P 500 Index climbed another 5%. That's a massive jump for the broad market.
How I Avoid the Market's Weakest Sectors
By Vic Lederman, editorial director, Chaikin Analytics
Despite the massive gains we've already seen this year... the market is still soaring. In the past month alone, the S&P 500 Index climbed another 5%. That's a massive jump for the broad market. Some sectors did even better over the same time frame... a lot better, in fact. For example, the Consumer Discretionary Select Sector SPDR Fund (XLY) soared about 11%. And the Financial Select Sector SPDR Fund (XLF) posted a roughly 10% gain. Folks, that's one month of gains. Not a half year, or a full year... just one month. And we're not talking about some hole-in-the-wall segments of the market, either. These are among the top-level sectors as defined by S&P. There are 11 top-level sectors. And the best of them have been soaring. But that doesn't mean all the sectors posted huge gains. So today, let's take a closer look at two that particularly struggled recently...
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I'm talking about the Materials Select Sector SPDR Fund (XLB) and the Health Care Select Sector SPDR Fund (XLV). As their names imply, these exchange-traded funds ("ETFs") track the materials and health care sectors, respectively. Over the past month, XLB is up less than 2%. And XLV is down a bit less than 1%. Those numbers might seem small at first. But remember that the broad market and other top-level sectors soared over the same time frame. Put simply, overallocation to the wrong sectors at the wrong time will lead to lower returns. Fortunately, the Power Gauge makes spotting these "bearish" runs easy. Just consider XLV... Again, this ETF tracks the health care sector. The Power Gauge rates each of the individual stocks in XLV. And it also gives the ETF an overall rating. Take a look at the chart below...
This is a six-month chart of XLV. And it shows the Power Gauge's ratings in the bottom panel. As you can see, our system turned "bearish" on XLV back in mid-October. That means the Power Gauge told us in advance that it saw rough waters ahead for this major market sector. And as we now know, that's exactly what played out. Looking closer, it's no surprise that this happened... XLV holds 61 stocks rated by the Power Gauge. And when we look at their individual ratings, it's obvious that the sector is struggling today. Only six stocks in XLV currently earn a "bullish" or "very bullish" rating right now. Meanwhile, 17 of the fund's holdings fall into the "bearish" or "very bearish" buckets. And like you'd expect, XLV currently earns a "very bearish" rating from the Power Gauge. Does this mean the end of health care stocks? Absolutely not. The market churns. And over the course of a year, some sectors will outperform others. The important part is making sure you're avoiding the weakest parts of the market. And when possible... you want to align yourself with the strongest parts, too. The Power Gauge isn't a crystal ball. But it helps point us in the right direction. Right now, it's telling us that health care stocks and materials stocks are struggling. So I know to focus my attention elsewhere. And I recommend you do the same. Good investing, Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.5%
10
13
7
S&P 500
+0.62%
132
287
82
Nasdaq
+0.87%
25
54
22
Small Caps
+0.24%
591
1021
294
Bonds
+0.99%
Consumer Discretionary
+1.12%
17
27
6
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are Bullish. Major indexes are all bullish.
* * * *
Sector Tracker
Sector movement over the last 5 days
Health Care
+2.21%
Real Estate
+2.06%
Discretionary
+2.02%
Utilities
+1.82%
Staples
+1.78%
Communication
+1.57%
Financial
+1.2%
Industrials
+0.94%
Materials
+0.73%
Information Technology
+0.06%
Energy
-1.9%
* * * *
Industry Focus
Aerospace & Defense Services
13
18
1
Over the past 6 months, the Aerospace & Defense subsector (XAR) has outperformed the S&P 500 by +11.34%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #5 of 21 subsectors.
Top Stocks
TGI
Triumph Group, Inc.
DCO
Ducommun Incorporate
DRS
Leonardo DRS, Inc.
* * * *
Top Movers
Gainers
RL
+3.92%
TSLA
+3.7%
VST
+3.51%
LRCX
+3.38%
LVS
+3.19%
Losers
SMCI
-7.13%
HSIC
-3.14%
GPN
-2.7%
RMD
-2.55%
VRSN
-2.32%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
ZS
No earnings reporting today.
Earnings Surprises
No significant Earnings Surprises in the Russell 3000.
* * * *
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