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The Federal Reserve’s affirmation that they will be taking an aggressive stance with their financial coverage to combat inflation halted an rising downtrend reversal within the markets. Previous to feedback from Fed Governor Brainard on Tuesday, the S&P 500 and Nasdaq had been each trending increased, 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 may see within the chart above, the Nasdaq is now seeking attainable draw back assist following its break beneath every of its transferring averages. I’ve highlighted this Index’s February low as the subsequent space of attainable assist and, presently, 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 strain 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 had been citing a attainable downturn in chip demand subsequent 12 months as their company prospects face slowing earnings and gross sales. In different phrases, fears of an financial slowdown subsequent 12 months are hitting this traditionally cyclical trade now.
The elevated battle in Ukraine can be weighing on the group, as this nation produces over 50% of the world’s Neon provide. This gasoline is a key part within the manufacturing of Semiconductor chips.
DAILY CHART OF REAL ESTATE SECTOR (XLY)
Not all shares suffered final week, nevertheless, 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 constructions enable frequent lease hikes which can be linked to the patron worth index (CPI).
With excessive gasoline and meals costs anticipated to maintain CPI elevated, this makes REITs a good way to hedge towards excessive inflation. Their requirement to pay out a minimum of 90% of their taxable income as dividends is one other, as many of those shares provide enticing yields.
Subscribers to my MEM Edge Report had 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 increased, and if you would like fast entry to it, use this link here.
You will discover different prompt shares in my MEM Edge Report which can be trending increased whereas appearing as a beautiful hedge to the at the moment 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.
The truth is, being attentive to sector rotation was how I used to be in a position to have a 75% win price among the many 140 shares I prompt as buys final 12 months. 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 dwell webinar subsequent Wednesday night. You can use this link here to sign up! In case you are unable to attend, for those who enroll now, you will have entry to the recording.
On this week’s edition of StockCharts TV’s The MEM Edge, I overview the break within the Nasdaq and what areas are driving this Index down. I additionally spoke with particular visitor Danielle Shay from Easier Buying and selling about what to be looking out for with shares as a result of report earnings this month.
You too can watch my special presentation “Understanding Sector Rotation”, the place I enable you to get a transparent grasp on sector rotation! I show the best way 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 an expert investing marketing consultant and the president of MEM Funding Analysis. After eight years of engaged on Wall Road, Ms. McGonagle left to grow 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 huge names like Constancy Asset Administration, Morgan Stanley, Merrill Lynch and Oppenheimer.
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