Equity markets showed signs of stability today after several days of selling that started on January 23. Hard-hit emerging market currencies rebounded. News about the improving economy and an earnings surprise by FaceBook set the tone for the positive market action.
The chart shows that the benchmark Fidelity Spartan U.S. Equity Index Fund (FUSEX) was able to hold its 100-day moving average, which has provided support for more than a year:
The table below shows the highest-ranked Fidelity mutual funds based on their three-month return. The U.S. stock market continues to lead in 2014, since no international fund made it to the top 10 list so far in 2014. The nine out of the ten highest-ranked funds represent subsectors of the health care and the technology industries:
The Fidelity Select Biotechnology Fund (FBIOX) was the best performing Fidelity mutual fund in 2013. The chart shows that the price of FBIOX consolidated in October and December, but started the new year with impressive gains.
We’d like to point out that after the recent large gains the biotech sector is overbought now and ripe for a pullback. Investing in this sector carries above average risks, but can be highly rewarding for aggressive investors.
The biotech sector was one of the hardest hit in the stock market sell-off today. However, the one-year chart of the Fidelity Select Biotechnology Fund (FBIOX) shows that the bull market is still intact. The chart also shows that corrections are normal, but to confirm the bullish trend, we would like to see FBIOX making a new high again in the next few weeks.
The reason for the importance of the biotechnology trend is that this sector has led the bull market of 2013. FBIOX turned out to be an excellent way to invest in the biotech sector, just as in past bull markets (e.g. 1999 and 2003). And just as in the past, market leading sectors (and the corresponding Fidelity mutual funds) making higher highs and higher lows were required to propel the broad market indexes higher.
The Fidelity Select Defense & Aerospace Fund has been an outstanding investment throughout 2013 with an excellent 41.57% year-to-date return. Top holdings include defense companies, such as United Technologies (UTX), Boeing (BA) and Precision Castparts (PCP).
The chart shows that FSDAX has accelerated its momentum and now moved up to the #4 ranked position on the Top 10 Fidelity Mutual Funds list. The next few trading sessions will show how much impact the Iran nuclear deal has on the defense sector and what to expect from FSDAX, as an investment.
Stock market indexes closed at all time highs on low volume today. One of the strongest performers is the Fidelity Select Software and Computers Fund (FSCSX, last change: 1.04%). FSCSX has returned 37.15% so far in 2013, handily outperforming the market.
The Fidelity Select Natural Gas Fund (FSNGX, last change: 1.06%) is the best-performing sector fund in October based on the momentum ranking provided by FidelitySignal.com. FSNGX continues to show a bullish chart pattern and a breakout to a new high can provide a new buying opportunity.
The Fidelity Select Health Care Fund (FSPHX, last change: 1.12%) is one of the strongest performing Fidelity funds in August. FSHPX is now ranked amongst the top 10 Fidelity funds by FidelitySignal.com.
The chart pattern for the Fidelity Select Gold Fund (FSAGX, last change: 5.22%) has turned positive and we think that the sector is in the beginning stages of a new bull market now. FSAGX is making higher highs and higher lows, while clearing the 100 day moving average too. We wouldn’t be surprised to see a pullback in the next few days after the recent strong performance, which should provide investors with new opportunities to establish positions.
I highlighted the Select Medical Equipment and Systems Fund (FSMEX, last change: 1.44%) in the June 7 blog, as one of the best-performing Fidelity Select sector funds. FSMEX continues to perform well and reached another 52-week high, in spite of the recent market pullback.
The Fidelity Select Banking Fund (FSRBX, last change: 1.28%) shows a bullish chart pattern and is the first Fidelity Select fund to make a new 52-week high following the market correction that started a week ago.