Don't Get Stuck in Wrong Sectors: Next Rally Could Be Brewing Despite the Noise

investing.com:

The past week marked the anniversary of the ongoing bull market. Over the last 12 months, the S&P 500 index has surged by more than 15%, while the Nasdaq has recorded a remarkable 23.5% increase.

During this period, the technology sector (XLK) has outperfomed with a 38% gain, followed by a 35% rise in the communications sector (XLC) and a 15% increase in industrials (XLI), making them the top-performing sectors.

In contrast, utilities (XLU) have declined by -6%, real estate (XLRE) by -4.5%, and consumer staples (XLP) by -0.45%, marking them as the worst performers.

This breakdown underscores the leaders and laggards in the current market cycle. The underperforming stocks are those that have struggled to keep up and may not be the best bets for the upcoming uptrend. In fact, the disappointed investors right now are most likely those who got stuck in the wrong stocks and sectors.

If we take the S&P 500 as a reference, we can see how the market has rebounded after anchoring at the support level of 4200 points, a key level dating back to an uptrend starting from the October 2022 lows and the 200-day moving average.

This level is significant as it coincides with the origin of a bullish trend starting from the October 2022 lows and the 200-day moving average based on the trendline drawn.

This is currently confirmed by the BPI indicator (the bullish percentage index of stocks in the basket), which touched the oversold level at the beginning of October and fell below 30%, precisely to 28%, marking the lowest level since 1996.

These conditions, below the 30% threshold, indicated extreme oversold conditions but at the same time, the projection of the indicator above 30% along with the positive MACD indicates improving market