(By Rich Bieglmeier) Just a few weeks ago, in this column we wrote to buy the S&P and forget about it
. That's because so few sectors were showing signs that they were prepared to outperform the benchmark index.
Since then, iStock has seen a transformation different from anything we have witnessed during our sector analysis in past years, a parade of emerging buys and sells with almost nothing in between the two.
It's clear that money is rolling out of the recent strong performers, at their tops, and into lagging underperformers. It is called sector rotation. We are especially excited to see large cap growth taking the lead over value, and defensive sectors like utilities trailing more traditional growth sectors like technology. It's a sign, in our view, that Wall Street is comfortable and plans on taking the market higher.
With 19 fresh, emerging bull sectors making this week's list, it should be no problem for investors to find ETF of stock ideas in the days and weeks ahead. Of course, as we do every week, later today we will identify one of our favorite companies from the buy columns.
If iStock were forced to make an exchange traded fund selection from our projected group of winners, we'd pick a technology ETF such as Technology Select Sector SPDR (XLK). We had a number of technology sub-sectors make our list – as you will see – and the group as a whole should perform fairly well.
Shorter-term traders might consider tightening up their stops on winners from the bear qualifiers. There is no sense in letting profits get flattened when you see the steamroller coming. For core holdings, a covered call strategy might help you make up lost ground to other, hotter sectors and the indexes.
Overall, iStock believes the rotation from defensive, value oriented sectors to growth, giddy up and go industries is a major positive for investors in the immediate-term. The fresh legs should help take the indexes to new, 52-week highs.
Here is this week's sector performance review:
EMERGING BULL: Industries with positive technical analysis traits that are in the early stages, indicating possible above average returns in the near-term:
Industrial Engineering (our #2 favorite behind tech)
Internet (mostly thanks to Google Inc. (GOOG))
Platinum and Metals
Forestry and Paper
MATURE BULL: Industries that have outperformed and their charts suggest the above average returns could continue:
MATURE BEAR: Industries that have underperformed and, based on their current chart patterns, could continue to lag:
Restaurants and Bars
EMERGING BEAR: Industries that have fresh negative technical analysis set ups and could have subpar performance in the weeks ahead:
Fixed Telecom (better keep an eye on those AT&T, Inc. (T) profits)
Gas and Water Utilities