The Federal Reserve’s affirmation that they’re going to be taking an aggressive stance with their financial coverage to battle inflation halted an rising downtrend reversal within the markets. Previous to feedback from Fed Governor Brainard on Tuesday, the S&P 500 and Nasdaq have been each trending larger, with the Tech-heavy Nasdaq eyeing a break again above its final space of attainable upside resistance — its 200-day transferring common.
DAILY CHART OF NASDAQ COMPOSITE
As you’ll be able to see within the chart above, the Nasdaq is now searching for attainable draw back help following its break beneath every of its transferring averages. I’ve highlighted this Index’s February low as the subsequent space of attainable help and, at the moment, it is 4.5% away.
Final week’s sharp drop within the Nasdaq was amid a decline in every of the heavyweight FANMG shares, which misplaced a mean of 4%. Semiconductor shares suffered much more, with a 7.7% decline that additionally put downward stress on the Nasdaq.
DAILY CHART OF SEMICONDUCTOR INDUSTRY (SOXX)
This was the 2nd week of sharp declines in Semiconductor shares, which started the prior week amid Wall Road downgrades to the group. Analysts have been citing a attainable downturn in chip demand subsequent yr as their company prospects face slowing earnings and gross sales. In different phrases, fears of an financial slowdown subsequent yr are hitting this traditionally cyclical trade now.
The elevated battle in Ukraine can also be weighing on the group, as this nation produces over 50% of the world’s Neon provide. This fuel is a key element within the manufacturing of Semiconductor chips.
DAILY CHART OF REAL ESTATE SECTOR (XLY)
Not all shares suffered final week, nonetheless, as REIT shares posted a achieve after the sector reversed its downtrend the prior week. REITs are corporations that personal or finance income-producing actual property, and their lease buildings permit frequent hire hikes which are linked to the buyer value index (CPI).
With excessive fuel and meals costs anticipated to maintain CPI elevated, this makes REITs a good way to hedge in opposition to excessive inflation. Their requirement to pay out a minimum of 90% of their taxable earnings as dividends is one other, as many of those shares provide enticing yields.
Subscribers to my MEM Edge Report have been alerted to a top-performing REIT in final week’s report, and the inventory has since far outpaced its friends. This inventory is poised to commerce a lot larger, and if you would like instant entry to it, use this hyperlink right here.
You will discover different advised shares in my MEM Edge Report which are trending larger whereas performing as a beautiful hedge to the presently weak markets. This twice-weekly report additionally highlights sector rotation because it’s taking form. Final week, we mentioned the transfer away from Semiconductor shares whereas additionally reviewing the bullish transfer into REIT shares.
In actual fact, being attentive to sector rotation was how I used to be capable of have a 75% win price among the many 140 shares I advised as buys final yr. If you would like to listen to extra about methods to outperform the markets during times of heightened volatility, I urge you to attend my reside webinar subsequent Wednesday night. You need to use this hyperlink right here to enroll! In case you are unable to attend, in the event you enroll now, you will have entry to the recording.
On this week’s version of StockCharts TV’s The MEM Edge, I evaluation the break within the Nasdaq and what areas are driving this Index down. I additionally spoke with particular visitor Danielle Shay from Less complicated Buying and selling about what to be looking out for with shares resulting from report earnings this month.
You can even watch my particular presentation “Understanding Sector Rotation”, the place I show you how to get a transparent grasp on sector rotation! I display find out how to spot strikes out and in of sectors, key drivers for rotation, why it is vital to be within the right sector and other ways to capitalize on rotation.
Warmly,
Mary Ellen McGonagle, MEM Funding Analysish
Mary Ellen McGonagle is knowledgeable investing marketing consultant and the president of MEM Funding Analysis. After eight years of engaged on Wall Road, Ms. McGonagle left to turn out to be a talented inventory analyst, working with William O’Neill in figuring out wholesome shares with potential to take off. She has labored with shoppers that span the globe, together with large names like Constancy Asset Administration, Morgan Stanley, Merrill Lynch and Oppenheimer.
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