Sentiment is Turning Bullish Again; Five Sectors that can Lead the Market Higher

Strong earnings and a potential breakthrough in the negotiations with North Korea made investors feel more cheerful and caused a broad rally in the stock market.

fusex.051018

Equity markets around the globe rallied in recent days, but the U.S. market continues to be the leader.

Rising tensions in the Middle-East and the strengthening dollar resulted in the energy and natural resources sectors becoming the strongest performers in the last three months (see article):

Sector_Rotation_051018

fnarx.051018.png

 

Large-cap real estate stocks also rallied, as we highlighted earlier (see more):

fresx.051018.png

 

We also like the bullish trends in technology, medical devices, and financials sectors:

fbsox.051018.png

fsmex.051018.png

fslbx.051018.png

 

View fund rankings at FidelitySectorReport.com

Powered_by_axiomix_180x30

 

 

 

 

.

Advertisements

A Bullish Case for the Market: The Strongest Sectors are Getting Stronger

Summary

  • While the S&P500 index pulled back in the last six weeks, the leading sectors continue to advance.
  • We expect to see additional trading opportunities in the next few weeks in the technology, utilities, cyclicals, consumer staples, and industrials groups.
  • Our technical screen shows that real estate and health care can also strengthen.
  • It is best to avoid weak sectors that continue to weaken, such as energy and financials.

 

The benchmark S&P 500 index pulled back from its all-time record since early March, but volatility stayed low in spite of geopolitical uncertainties in Syria and on the Korean peninsula. In our view, any improvement in the outlook for tax or regulatory reform in Washington can serve as a catalyst to spark a broad-based stock market rally.

spy-042217

In the section below we review the strongest industry groups that we think are worth watching closely in the next few weeks.

Technology: The strongest sector fund in this group is the Fidelity Select Technology Fund (FSPTX). FSPTX has been one of the best performing Fidelity funds in the last 12 months and it continues to advance:

fsptx-042217

Utilities: The Fidelity Utilities Fund (FSUTX) is regarded as a conservative investment, but has appreciated in price considerably due to interest rates trending lower:

fsutx-042217.png

Cyclicals: Economists usually rejoice when consumers increase their spending on goods and services since it shows that the economy is on a strong footing. One of our favorite investments in this space is the Fidelity Select Leisure Fund (FDLSX). FDLSX has turned from a market performer to an outperformer in the last two weeks and the technicals continue to be very bullish:

fdlsx-042217.png

Industrials: We highlight only the Fidelity Select Defense and Aerospace Fund (FSDAX) here as one of the top investments in this space, but we think that the whole industrials group can be interesting going forward.

fsdax-042217.png

Consumer staples: Another conservative investment and can generate solid returns:

fdfax-042217.png

Weak sectors, which are underperforming the broader market include the Energy and the Financials groups. Here we show two examples, the Fidelity Select Energy Services Fund (FSESX) and the Fidelity Select Banking Fund (FSRBX). Both funds are below their respective 100-day moving averages and show a negative price pattern:

fsesx-042217.png

fsrbx-042217.png

.