Folks, a serious divergence is happening in the market right now. And it's one that most investors aren't paying attention to.
You Won't Believe How One 'Very Bearish' Sector Pairs With a 'Very Bullish' One
By Vic Lederman, editorial director, Chaikin Analytics
Folks, a serious divergence is happening in the market right now. And it's one that most investors aren't paying attention to.
After all, tech stocks have dominated the investing narrative over the past few years. We're seeing that play out this year, too.
Despite recent turmoil, the Technology Select Sector SPDR Fund (XLK) has soared an incredible 40% over the past year. That outpaces the S&P 500 Index's 28% return over the same time frame.
And that makes it the top-performing sector in the Power Gauge over the past year...
You see, our one-of-a-kind system ranks 11 top-level market sectors. It also ranks 20 subsectors.
And right now, something unusual is going on in the market. That's because a high-performing subsector is closely related to a poor-performing top-level sector.
We're about to witness a historic stock market shakeup that could soon create devastating losses for some investors... while potentially sending a specific group of stocks up 100% or more in six weeks or less. Until midnight tonight, click here to learn more (includes two free tickers).
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If you haven't guessed already, today we're looking at the real estate sector and the homebuilders subsector.
That's right – the homebuilders subsector is the best-performing subsector over the past 12 months. The SPDR S&P Homebuilders Fund (XHB) rose more than 50% over that time frame.
That's an incredible result for such a niche subsector.
But here's the thing...
The top-level real estate sector is telling an incredibly different story. The Real Estate Select Sector SPDR Fund (XLRE) isn't even up 10% over the past 12 months.
That makes the real estate sector one of the worst-performing sectors in the Power Gauge over the past year. Take a look at XHB and XLRE together on a chart.
As you can see, it's a big gap. And it's one that has only widened this year.
In fact, XHB is up roughly 15% so far this year. Over the same time frame, XLRE has lost roughly 3%. And looking ahead, XHB is rated "very bullish" in the Power Gauge. Meanwhile, XLRE has a "very bearish" rating.
That's about as dramatic as it gets.
Now, regular ChaikinPowerFeed readers will already know some of the "why" behind this. Back in January, Marc Chaikin warned readers to "expect the housing market to stay tight."
And as he also explained...
The annual rate of new single-family homes sold in the country is around 590,000 (as of November). That might sound like a lot at first. But... it's well below most of the 1990s and 2000s – and even most of the 1980s.
Put simply, the U.S. is still facing a housing shortage. And that means that homebuilders have a massive tailwind behind them.
But when it comes to "real estate" as a whole... it's a different story. The reality is that the pandemic is still causing a "hangover" in commercial real estate.
Occupancy is still below "normal" levels. And that means that commercial buildings are producing less income than investors expected them to.
That's terrible for companies with exposure to commercial real estate. And it's why we're seeing the top-level real estate sector continue to stumble.
Folks, the takeaway from all of this is simple...
The homebuilders subsector and the real estate sector may sound like they go hand in hand.
But they're dramatically different segments of the market. And they help illustrate that there's nearly always an opportunity – or something to be wary of – hiding somewhere.
I'll be using the Power Gauge to help me find the opportunities. And I'll also use it to help me avoid the traps.
Good investing,
Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.94%
7
21
2
S&P 500
+1.23%
148
296
52
Nasdaq
+1.56%
27
58
15
Small Caps
+1.2%
565
1008
327
Bonds
+1.36%
Information Technology
+2.25%
24
35
6
— According to the Chaikin Power Bar, Large Cap stocks and Small Cap stocks are Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Real Estate
+4.75%
Information Technology
+4.0%
Utilities
+3.22%
Health Care
+2.9%
Financial
+1.98%
Communication
+1.56%
Materials
+1.44%
Industrials
+1.28%
Staples
+1.02%
Energy
+0.83%
Discretionary
+0.62%
* * * *
Industry Focus
NYSE Technology Services
16
15
4
Over the past 6 months, the NYSE Technology subsector (XNTK) has outperformed the S&P 500 by +4.71%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #7 of 21 subsectors and has moved up 1 slot over the past week.
Top Stocks
GOOGL
Alphabet Inc.
QCOM
QUALCOMM Incorporate
AMAT
Applied Materials, I
* * * *
Top Movers
Gainers
SMCI
+15.81%
DHI
+6.47%
MKTX
+6.11%
NOW
+5.4%
IDXX
+5.26%
Losers
ALB
-5.82%
WBD
-4.21%
SOLV
-4.09%
FMC
-3.55%
HAS
-2.69%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
DE
AMAT
WMT
CPRT
TTWO
No earnings reporting today.
Earnings Surprises
PGR The Progressive Corporation
Q1
$3.76
Beat by $0.54
CSCO Cisco Systems, Inc.
Q3
$0.87
Beat by $0.03
DT Dynatrace, Inc.
Q4
$0.30
Beat by $0.03
* * * *
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