Year 2023- Sector outlook. Which sector is going strong?- part 1

Today we will focus on the sector analysis again.

Year 2022 is coming to the end, not sure if Santa Claus rally will be coming, but let us analyse the potential leading sector in year 2023. Get the fund ready!

A quick analysis on Index:

Dow Jones industrial:

The strongest index among 3. The weekly MA30 is starting to slope up. Price is above MA30 for one month.

SPX

Overall is down-trend. MA30 is flattening. Price is above MA30. We shall see if it can hold above the MA30 and it will be a bullish signal, if MA30 turns up and the price closes above the previous swing high.

Nasdaq index. The weakest among all. Down trend is clear, price is below MA30 and MA30 is sloping down. Not a good time to buy any technology stocks.

Overall, including the strongest Dow Jones index, we need to see a retracement with lower volume, then the price needs to close above the previous swing high. This will be a very solid technical indication of reversal of bullish trend.

For the sector analysis, I will be using the following tickers:

I will arrange the strength of each sector using stage analysis.

Sector: Homebuilder
Ticker XHB

Areas involved: Building Products, Home Furnishings, Home Improvement Retail, Homefurnishing Retail, and Household Appliances sub-industries

Some key components: Home Depot Inc., Lennar Corporation Class A, Owens Corning

Chart analysis (weekly):

MA30: Flattening

Price: Above MA30

General trend: Consolidating

Stage: Stage 1

From the chart, it is now consolidating, and the key level is to break the previous swing high. For the lower side, it must hold above the weekly 30.

Entry: MA30 sloping up, break above the previous swing high of $68.2.

Sector:Materials
Ticker XLB

Areas involved: Chemicals; metals and mining; paper and forest products; containers and packaging; and construction materials.

Some key components: Linde plc, Nucor Corporation, Dow Inc.

Chart analysis (weekly):

MA30: Flattening

Price: Above MA30. Break the previous swing high.

General trend: Consolidating.

Stage: Stage 1

From the chart, it is now consolidating, but the price managed to break the previous swing high. It is stronger than XHB.

Entry: Retracement that can hold above the MA30, then break the high again.

Strength: XLB > XHB

Sector:Energy
Ticker XLE

Areas involved: Oil, gas and consumable fuels; and energy equipment and services.

Some key components: Exxon Mobil Corporation, Chevron Corporation, Schlumberger NV

Chart analysis (weekly):

MA30: Sloping up

Price: Above MA30.

General trend: Up

Stage: Stage 2

Although XLE is still forming an up-trend, but the crude oil price is at stage 4. If want to enter XLE, a stop is important.

Entry: Critical support or break the previous swing high. However, I will not enter any energy stock or ETF.

Strength: XLE> XLB > XHB

Sector:Finance
Ticker XLF

Areas involved: Diversified financial services; insurance; banks; capital markets

Some key components: Berkshire Hathaway Inc, JPMorgan Chase & Co., Goldman Sachs Group Inc.

Chart analysis (weekly):

MA30: Sloping up

Price: Above MA30.

General trend: Consolidating. Breaking the previous swing high.

Stage: Early Stage 2

XLF is my current main target. Similar to XLB, it breaks the previous swing high, but the MA30 is sloping up more obviously. If you read my previous post, finance sector is one of the potential sector to be rotated to lead the market.

Entry: The good thing is, it is now undergoing the retracement. If it can hold above the MA30, the moment it breaks the previous swing high of $36.5, this will be a strong entry.

Strength: XLE> XLF> XLB > XHB

Sector: Industrial
Ticker XLI

Areas involved: Aerospace and defense; industrial conglomerates; marine; transportation infrastructure; machinery; road and rail; air freight and logistics; commercial services and supplies; professional services; electrical equipment; construction and engineering; trading companies and distributors; airlines; and building products

Some key components: Caterpillar Inc., Boeing Company, Lockheed Martin Corporation

Chart analysis (weekly):

MA30: Sloping up

Price: Above MA30

General trend: Down trend is broken.

Stage: Early stage 2

From the chart, it looks like XLI is strong. However, the key reason is because of the Aerospace & Defence industrial such as LMT who runs very high because of the Russia-ukraine war. If we remove the Aerospace & Defence sectors, XLI in fact not doing very well.

Entry: The retracement must hold above MA30. The entry will be the moment it breaks the previous swing high.

Strength: XLE> XLI> XLF> XLB > XHB

Sector: Technology
Ticker XLK

Areas involved: Technology hardware, storage, and peripherals; software; communications equipment; semiconductors and semiconductor equipment; IT services; and electronic equipment, instruments and components.

Some key components: Apple, Nvdia, Microsoft

Chart analysis (weekly):

MA30: Sloping down

Price: Below MA30

General trend: Down-trend

Stage: Stage 4

From the chart, similar to QQQ, a very clear down-trend is observed. Not a time to get into technology sector yet.

Entry: Minimally wait the MA30 to be flattening first.

Strength: XLE> XLI> XLF> XLB > XHB > XLK

To be continue…..