We talked yesterday about what the big indexes are telling us. Today I want to dive a little bit deeper into a few important sectors.
No doubt you’ve heard this stat: technology represents about 25% of the entire S&P 500, a weight obviously making it an important sector for the overall market.
Underneath the surface, there are a few key levels I want to make sure I point out so you can decide if you should short U.S. stocks or not.
From an upside confirmation perspective, the Dow Jones Internet Index Fund (NYSEArca: FDN) holding above $148 would be incredibly constructive for the sector.
This index has been one of the leaders along the way of this uptrend:
From a risk-management standpoint, the Software Index Fund (NYSEArca: IGV) holding above $188 is a key level.
If we’re below that, in all likelihood something is wrong and a more neutral short-term approach towards equities is probably best:
We can make the same argument about the Cloud Computing Index Fund (NYSEArca: SKYY) and $55.
Holding above that level is key.
We want to be aggressively buying stocks if FDN, IGV, and SKYY are above their respective lines in the sand.
On another positive note, Berkshire Hathaway (NYSE: BRKB) went up in price every single day last week.
This is the largest component of the S&P Financials Sector Index with an even higher weighting than JP Morgan Chase (NYSE: JPM).
I like to treat BRKB as another index, like the S&P 500 or Nasdaq Composite.
If we’re above $200 in BRKB this is further evidence to me that we need to be aggressive from the long side.
More specifically, not just buying BRKB, but financials in general, and therefore the rest of the U.S. stock market as a whole.
One thing that’s worked for us is to own the leadership. I’ve talked about this to Breakout Profits subscribers often.
Getting cute and bottom-fishing underperforming stocks and sectors has proven to be foolish.
While sector rotation is certainly evident (e.g. health care now making all-time highs after struggling for a while), buying the stocks that are already going up continues to make the most sense.
I went through thousands and thousands of charts last weekend alone.
I’m not seeing enough evidence to suggest that turning bearish and shorting stocks aggressively here makes much sense.
To wise investing,
Editor, Big Market Trends