Sector Rotation: Telecom Stocks Turn Negative

Weak earnings, fierce competition, and confusion about the value of new product offerings have contributed to the under-performance of the telecom sector in 2017.

Chart 1. shows that the price pattern of the Fidelity Select Telecommunications Fund (FSTCX)  turned negative earlier this week. We think that investors may be best served by avoiding this sector until the current consolidation phase completes.

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Chart 1.

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Sector Rotation: the Banking and the Telecommunications Sectors are the Top Performers Today; Real Estate and Gold Stocks are in Correction

Markets rallied today due to positive economic data following the sell off yesterday that was triggered by Chairwoman Yellen signaling the possible end of the Federal Reserve’s Quantitative Easing program this year, which may be followed by interest rate increases next year.

The Fidelity Select Banking Fund (FSRBX) was the top performer today. The FSRBX chart shows the continuation of the multi-year bull market.

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The Fidelity Select Telecommunications Fund (FSTCX) was the second best performer. The improving economy and innovative new cellphone and service technologies can become catalysts for this sector, which has underperformed the market since last October:

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The Fidelity Real Estate Fund (FRESX) did not participate in the rally in a meaningful way today. The chart shows that after making impressive gains in 2014, FRESX is in a correction mode now. We continue to like real estate investments, since the improving economy should continue to be positive for both commercial and residential companies in this space.

fresx

While 80% of Fidelity’s Select sector funds gained today, the Fidelity Select Gold Fund (FSAGX) was one of the weakest Fidelity funds. Similarly to real estate, gold stocks had a strong run up in the last few months and now in correction mode. However, unlike real estate, we regard gold and related investment as purely speculative. On the plus side, FSAGX can be used to increase diversification and to hedge against geopolitical events.

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Source: FidelitySignal.com

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Sector Rotation: Gold and Utilities Stocks are Poised to Advance; Avoid the Telecommunications Sector

Equity markets  sold off this week due to worries about the escalation of the Ukraine situation and the fears about the potential weakening of the Chinese economy.

Few sector funds are making higher highs in this negative market environment of the last few days. We highlight here Fidelity funds corresponding two sectors, gold and utilities, which show the strongest relative strength compared to our benchmark Fidelity Spartan U.S. Equity Index Fund (FUSEX).

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Both the price action and the declining relative strength line (the ratio of the investment versus the S&P500 index) shows that the telecommunications sector is one of the weakest equity sectors right now. We would avoid investing in this sector based on current conditions.

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Buy and sell signals are available at FidelitySignal.com

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Overextended Stock Market Sells off Today; Utility Sectors Turn Bearish;

The sell-off for equities was broad based today, which is not surprising in light of the almost uninterrupted advance since the October correction.

One troubling sign, however, is that defensive sectors are impacted as much, or even more so, than the more aggressive growth sectors. For example, telecom and energy utilities are regarded as conservative investments, because they can provide dividend income and stable returns. The two charts below show that the corresponding Fidelity Telecommunications and the Utilities Funds rolled over and entered into a declining phase.

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Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

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