While The Market Runs Red, Will These Sectors Hold Up?
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ETF Trade Watch
This week has started off on a red foot. The overall market sank yesterday, and with it, every sector. There was really no where to go to find relief from this decline, only sectors that weren’t hit as hard.
Now, trend days like yesterday often trigger people to call the end of the rally and the start of a selloff, while we have been selling off for quite sometime now, it is important not to make predictions. We want to let the market play itself out, only for us to come in when we see opportunity to make a good trade.
Before we claim the bull rally is over, we would like to see a few more levels broken. Until then, we will look for any opportunities the market gives us and trade what is in front of us. The two sectors that were affected the least by Tuesday’s decline were Energy and Consumer Staples, which still finished red on the day.
Energy Select Sector SPDR ETF (XLE)
The Energy Sector should be on your watchlist anytime the market changes cycles. More often than not, whenever the market hits a rough patch, energy either trends upward or is simply not hit as hard. Since demand for oil and gas is still high around the world, and with the war in Eastern Europe still raging, this sector is still very much in play.
Consumer Staples Select Sector SPDR ETF (XLP)
Consumer Staples also held up to the storm yesterday. As consumer spending remains robust, these names should still see some strength, even when the market is weak. If the market continues to pull, however, you would still expect this sector to be dragged down with it, unlike that of the Energy Sector.
A short trade could be made on this or most sectors when the market is on shaky ground like it seems to be. Still, the play is to watch and wait for an opportunity to present itself. predicting what the market will do is a great way to lose, especially in a volatile time like this.
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