Energy and Financials Look Like Tech 5-1/2 Years Ago
2022 has begun with another sharp rotation from growth to value stocks. The 
SPDR Technology ETF had its biggest weekly drop in over a year, while the 
SPDR Energy ETF had its biggest gain in even longer.
Financials also jumped:
Price action in the two value sectors (XLE and XLF) seems to resemble XLK another moment 5-1/2 years ago. The chart below shows XLK between January 2015 and November 2016. Notice how the tech ETF spent more than a year consolidating sideways after a big run, chopping along its 100- and 200-day simple moving averages (SMAs) before breaking out. There was also a bullish candlestick pattern (post-Brexit kicker) on June 27-28, 2016:
XLE and XLF haven’t consolidated as long as XLK in 2016, but they have other similarities. Both moved sideways for at least six months and spent time below their 100-day SMAs. Both made one final higher low at the 200-day SMAs. Both had potentially bullish candlesticks (abandoned-baby hammers). And, most importantly, both closed at new highs.
It’s also noteworthy that XLK’s 2016 breakout helped launch the current regime of FANG and “big cap growth.” Now as investors shed tech stocks and monetary conditions grow less favorable, similar breakouts have occurred in the polar-opposite sectors. Are we entering a new phase of the market, led by neglected cyclical value names?
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SPDR Technology ETF had its biggest weekly drop in over a year, while the SPDR Energy ETF had its biggest gain in even longer. Financials also jumped:Price action in the two value sectors (XLE and XLF) seems to resemble XLK another moment 5-1/2 years ago. The chart below shows XLK between January 2015 and November 2016. Notice how the tech ETF spent more than a year consolidating sideways after a big run, chopping along its 100- and 200-day simple moving averages (SMAs) before breaking out. There was also a bullish candlestick pattern (post-Brexit kicker) on June 27-28, 2016:
XLE and XLF haven’t consolidated as long as XLK in 2016, but they have other similarities. Both moved sideways for at least six months and spent time below their 100-day SMAs. Both made one final higher low at the 200-day SMAs. Both had potentially bullish candlesticks (abandoned-baby hammers). And, most importantly, both closed at new highs.
It’s also noteworthy that XLK’s 2016 breakout helped launch the current regime of FANG and “big cap growth.” Now as investors shed tech stocks and monetary conditions grow less favorable, similar breakouts have occurred in the polar-opposite sectors. Are we entering a new phase of the market, led by neglected cyclical value names?
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
Important Information
TradingView is not affiliated with TradeStation Securities Inc. or its affiliates. TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
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