The Potential Leading and Losing Sectors

Being in the midpoint of the massive drop from major support on the $SPX and the YTD lows, I thought it would be a good idea to take a look at the leading and lagging sectors. This way we can then gauge who will be the first ones to hit new highs if we do move up or which ones will hit new lows if we do drop. With the use of Technical Analysis, I have picked 1 potential leading sector (in case we move higher) and 1 potential loser sector (in case we move lower).

The Potential Leader

There are a few sectors showing strength right now, notably Ultilities ($XLU), Gold Miners ($GDX), and  Consumer Staples ($XLP). However, it is pretty obvious why these stocks are showing strength as for the time being, it is “risk-off” and these are the sectors that will traditionally get bid up as the market falls. So which sector will see some upside if its “risk-on”?

$MOO –  Market Vectors Agribusiness ETF

One of the reasons why I believe this sector will see a nice bid to it if its “risk-on” is because some of the holdings have been showing some relative strength lately. Stocks like $CF, $MON, $MOS and $DE are all well off their YTD lows and one ($CF) is even at all-time highs! As for the chart itself, it is well off lows (which is bullish) with an RSI reading of 67, putting the momentum on the bulls side for now. As you can see, it is above the important pivot of ~$50.60. The 50 day SMA is acting as resistance, but with some sideways consolidation, that will go below the price and we should be headed easily toward the 200 day SMA.

 Daily Chart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Potential Loser

There are a few sectors that are showing relative weakness like Solars ($TAN), Shippers ($SEE), and Coal ($KOL), but one major sector catches my eye with its recent weakness.

$OIH - Oil Services HOLDRs 

The oil service stocks have been showing some weakness lately. One thing that catches my eye first is that while the market did NOT make a new low, the $OIH did. Now it is running into some trend-line resistance and the RSI is barely over the 50 midpoint mark. And while the $MOO is testing the 50 day SMA, this is NOWHERE near its own. As for the holdings, they do not look much better. $SLB, $HAL, $RIG and $BHI all look pretty bearish. If the market drops, I expect this sector to be sold off hard.

Daily Chart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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