Sector Spotlight: 2 ETFs That Could Be Poised For A Rally

Market Recap For July 7th, 2022

Wednesday’s pause gave way to another leg up in the current rally. All major indices, and most sectors, finished in the green.

Yesterday’s close was a solid one, which should lead to even higher prices today, assuming the monthly jobs report doesn’t have other plans.

Yesterday’s Sector Performance

Energy swapped places with Utilities, taking the top spot on Thursday.

Utilities ended up as the only sector in the red.

Five-Day Sector Performance

Discretionary is now the leading sector over the past week.

Energy is at the bottom of the week, but yesterday could mark a change.

ETF Trade Watch

The market experienced the third positive day in a row on Thursday as stocks rose in anticipation of the employment numbers set to be released on Friday. If the market does push higher, it would seem that Technology, Services and Consumer Discretionary will perform best, as these stocks have been among the hardest hit by the bearish cycle.

Two of the most common ETFs to consider in that scenario would be XLY and XLK.

Consumer Discretionary Select Sector SPDR (XLY)

Due to the recent market rally, XLY looks to break the recent high that came at the end of June, but if the price does not exceed this level, it could possibly set up a “double top” scenario. This is a bearish pattern. However, if the market rally continues, look for investors to pile into this ETF to take advantage of relatively low prices. If the jobs numbers come in lower than expected, it could spook investors from going long just yet.

Technology Select Sector SPDR (XLK)

A similar formation can be seen setting up for the tech-related ETF, XLK. As the ETF’s price rises, it’s drawing closer to the resistance level it was unable to break through at the $145-$147 price. The tech sector has seen some of the steepest declines of any area of the market, but this does present an opportunity. If the Fed is able to curb inflation, the tech sector could see a large rally as investors rush back into higher-risk assets.