S&P500 has correction during February, about 12% drop from the peak. It is still well above the long-term uptrend line support and breakout from the short-term downtrend line last week. S&P500 will continue to move within the uptrend channel to test the January high again.
To ride on the trend, we need to know which sector driving the market now, and which is the worst sector to avoid. Below is the S&P500 sectors year to date performance:
The top 5 performance components in Technology ETF (XLK) outperform S&P500:
The top 5 performance components in Consumer Discretionary (XLY) outperform S&P500:
The top 5 performance components in
Energy (XLE) outperform S&P500:
The world cannot without technology. Nowadays, we are too depending on information technology. Survey shown that we are spending average 4 hours on internet, using your iPhone to play game, surf Facebook, search info from Google, watch YouTube, and shopping in Amazon.
The smartphone has boom the market for the past decade, but technology companies will continue innovate and breakthrough. They have upcoming pipeline with smart car, virtual reality, cloud computing and artificial intelligence to lead the world for next few decades.
Facebook, Apple and Google are the top holding in XLK. Amazon and Netflix are the top holding in XLY. The all time favourite FAANG stocks also plunge during this market correction but all make a come back with good earning report exceed market expectation.
OPEC production cuts has successfully raising the oil price to $70 per barrel and achieved their goal to bring the inventory levels back to the 5 years average. OPEC will extend their production cut until 2019 to maintain the crude market in balance demand and supply. Besides, Donald Trump withdraw from the 2015 accord to curb Iran's nuclear program poses uncertainty to shock the crude market in recent rise.
The good news for us is that the high oil price will eventually good for energy stocks. The S&P500 sector cycle changed during the correction in February. Energy stocks performance is the strongest for the past 3 months where XLE up +15.09% thanks to high oil price. I believe energy sector will continue to lead the market for the rest of the year.
* I owns shares of XLE, APC, FB and NVDA.