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.

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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):

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

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

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View fund rankings at FidelitySectorReport.com

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Sector Rotation: Technology Sector Outperforms in 2015; Avoid the Utilities and Natural Resources Sectors

Summary:

  • The technology sector, led by Apple, semiconductor and large cap Internet companies, has become one of the leading equity sectors in 2015
  • Rising interest rates resulted in a trend reversal for the utility sector
  • The strengthening dollar and declining energy prices cause the natural resources sector to resume its decline

The Nasdaq index (where many of the market-leading technology companies are listed) closed above the historically important 5,000 level yesterday. This level has not been seen since the dot com bubble of 2000. This time around, we think that the bull market in the technology sector is sustainable and stock prices will go higher from here.

One of the best ways to participate in this trend for Fidelity mutual fund investors is by building a position in the Select Technology fund (FSPTX). The top portion of the chart below shows that the relative strength of FSPTX compared to the S&P 500 has turned positive in 2015, which is a very bullish sign:

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Steadily rising long-term Treasury rates caused a sharp sell off in the interest rate sensitive utilities sector. The chart of the Fidelity Select Utilities Fund (FSUTX) shows that the sector is not participating in the stock market rally and has broken its long-term uptrend:

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In a previous article we warned that it is too early to invest in the natural resources sector. In spite of the rally in January, this sector continues to be in a downtrend and we think that there are many better investment opportunities in this market.

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Read more about investment strategies involving these funds at FidelitySignal.com

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Sharp Sell-Off of Global Equities Continued Today; Technology Stocks in Bearish Downtrend

Fidelity Select Technology Fund (FSPTX, last change: -2.14%)

The Fidelity Select Technology Fund (FSPTX, last change: -2.14%) moved below its 100 day moving average and now it is in a bearish downtrend. We would avoid investing in this sector until the market trend reverses.

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

Can the grinch steal the holiday rally in 2011?


The technology sector, one of the market leaders during the recent fall rally, is in a bearish downtrend now. As we warned on Nov 17, the Fidelity Select Electronics fund (FSELX, change: -1.42%), just as most investments in the sector, was in danger of breaking down. Unfortunately, the breakdown did happen and the likelihood of a December rally to new highs has weakened significantly.

The technology sector, one of the market leaders during the recent fall rally, is in a bearish downtrend now. As we warned on Nov 17, the Fidelity Select Electronics fund (FSELX, change: -1.42%), just as most investments in the sector, was in danger of breaking down. Unfortunately, the breakdown did happen and the likelihood of a December rally to new highs has weakened significantly.

 

Mutual fund screens and buy/sell signals are provided by FidelitySignal.com  

Can the grinch steal the holiday rally in 2011?

The Fidelity Select Electronics fund (FSELX, change: -4.10%) and the technology sector has led the recent stock market rally. A breakout to new highs is needed to provide new market leadership. Otherwise, we may not see a Santa rally this year.

The Fidelity Select Electronics fund (FSELX, change: -4.10%) and the broader technology sector has led the recent stock market rally. Unfortunately, the rally has stalled recently and a breakout to new highs is needed to provide new market leadership. Otherwise, sadly, we may not see a Santa rally this year.

Mutual fund screens and buy/sell signals are provided by FidelitySignal.com