Sector Spotlight: Can The Mini Rally Continue?

Market Recap For July 11th, 2022

The most recent leg of the rally that began last month ended at Friday’s high, and the pullback that started didn’t seem to be over at yesterday’s close.

Assuming stocks decline further today, the ideal downside target for the S&P would be 3800. A failure to hold that mark could jeopardize the larger rally.

Yesterday’s Sector Performance

Utilities found their way back to the top of the market.

Discretionary and Services were co-leaders of yesterday’s drop.

Five-Day Sector Performance

Technology stocks have performed best over the past week.

Energy stills sits at the bottom, followed by Utilities.

ETF Trade Watch

Technology Select Sector SPDR (XLK)

The market likely has more downside to go. However, for now, if the rally is sustained through this week then the tech sector should see investors buying the dip. CPI data comes out Wednesday so traders should expect volatility to be high.

Communication Services Select Sector SPDR (XLC)

The same would be true for the Communications Services sector. If the rally continues investor will be buying names that have experienced the lowest lows of 2022. Tech and Communication Services qualify as being those types of sectors, as evidenced by their 25-30% year-to-date declines respectively.

However, if the short-term bullish forecast outlined above holds up, Comm Services and Tech will likely perform well, and that means XLC and XLK would too.