Short-Term Traders: Focus on Energy, Materials, Financials, Miners

06/27/2017 2:51 am EST

Focus: STRATEGIES

Ziad Jasani

Managing Director and Partner, Independent Investor Institute

While markets hover near all-time highs, it’s mandatory for us to pick the spots that have a higher probability to out-perform through Q2 earnings season asserts Ziad Jasani, of the Independent Investor Institute, Toronto, in his weekly Trader video.

Short-term traders in the S&P 500 are better served in Energy, Materials, Financials, and Miners this week.

The S&P 500 remains in a tight consolidation range (2,440-2,430), after poking out to new all-time highs last week (2,453.82) = Bulls still in control of the tape.

Is a foundation for new highs being built or are we seeing the calm before the storm? With Technology and Energy currently bouncing, and with Financials readying for one, the risks to the down-side come from Healthcare (short-term expensive), and Defensives this week (sensitive to yields rising) which are unlikely to bring the S&P 500 back to 2,400 or lower.

However, a closing value this week below 2,430 would imply we are starting a pull-back (-3% to -5%). If we do close the week above minor resistance at 2,454-2,446 target levels would be 2,471 and then 2,508 (1 and 2 Std Error Marks on 52 week routines).

Mid-To-Longer-Term investors don’t have a Sell decision this week unless the S&P 500 breaks below 2,400.

While markets hover near all-time highs, it’s mandatory for us to pick the spots that have a higher probability to out-perform through Q2 earnings season: Technology, Energy, Industrials, and potentially Healthcare, after we see a pull-back in the space.

Shorter-term, we continue to game swing-low-formations in Energy, Financials, Materials, and Technology this week.

S&P 500 sector positioning (out/under performance)

• Sectors poised to out-perform are:

Financials Financial Select Sector SPDR Fund (XLF), SPDR S&P Bank ETF (KBE)
Energy Energy Select Sector SPDR Fund (XLE)
Miners SPDR S&P Metals & Mining (XME)
Technology Technology Select Sector SPDR Fund (XLK)
Industrials Industrial Select Sector SPDR Fund (XLI)
and Materials Materials Select Sector SPDR Fund (XLB).
 
• Sectors poised to neutral-perform:

Telecom Telecom iShares US Telecommunications ETF (IYZ)
Discretionary Consumer Discretionary Select Sector SPDR Fund (XLY).

• Sectors more likely to under-perform :

Staples Consumer Staples Select Sector SPDR Fund (XLP)
Utilities Utilities Select SPDR Fund (XLU)
REITs Real Estate Select Sector SPDR Fund (XLRE)
Healthcare SPDR S&P Biotech ETF (XBI), SPDR S&P Pharmaceuticals ETF (XPH).

View the latest videos from Ziad Jasani of the Independent Investor Institute here

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