Why These 2 Sectors Are On Watch
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ETF Trade Watch
Looking at the market over the past week and it become obvious, we are in a downtrend, at least in the shorter term. This means we as market participants need to shift our focus away from the rally sentiment we were feeling not too long ago, and stay open to the possibility that we are back to a bearish cycle.
However long that might last, looking at the market as weak can help us gauge what are next trade will be. When the market is weak, it can be tough to go long, but it can still be done. Some sectors hold up better than other to a falling market, and other than shorting sectors like tech or communication services, can provide value in a weak market. Lets take a look at a sector you could look to go long on and one you may want to short.
Materials Select Sector SPDR ETF (XLB)
The Materials Sector could be a sector to put on a long trade for as many of the stock held within this fund are of companies that mine precious metals or supply building materials, both of which remain in demand, despite economic uncertainty over the year ahead.
Some of the fund’s holdings include, Freeport-McMoRan (FCX), Sherwin-Williams (SHW), and Linde PLC (LIN). Look for this sector to hold up as it did on Wednesday to what could continue to be worsening market conditions.
Technology Select Sector SPDR ETF (XLK)
A possible short target continues to be the Technology Sector. Once investors begin to sense weakness in the market, tech is usually the the sector to lead the market lower. When times are good traders and investors alike storm this high growth, high risk sector. When the market beings to turn, all these market participants being to become risk off and leave these high risk names in search for more stable gorund.
We could very well be at that point where participants are becoming increasingly risk off. Keep this sector on watch for a possible ride lower.
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