– ETF Watchlist –
While our expectation is that the market wants to move higher, we are still of the mind that before that happens, the market may pullback a bit. This is, of course, is a healthy thing for a market that has been red hot lately, and will ultimately lead to some nice set ups with better entries than going long at the top of the market.
Areas to watch still continue to be the tech and communication services sectors as investors look for the AI boom to continue to juice the market. As long as this hype remains, we expect the majority of the buying to be concentrated in these two sectors. So let’s take a look at the tech sector as that has been powering the market higher for much of this rally.
Technology Select Sector SPDR ETF (XLK)
The XLK has retreated back from making highs on the year near 177 and appears to have settled at around 172. As of this writing, the fund looks to be wanting to make a move higher with the tech giants gaining a bit of momentum to start the trading week.
However, this is not yet confirmed as a move higher seeing as how the pullback from last week was significant enough to suggest there could be more for the market to shed. But, as this sector has led the market higher for most of this rally, we think it will continue to do so, especially as the world is captivated by the AI narrative. A pullback to the 170 mark would give better risk reward if we continue from the pullback on Friday.
This sector has earned a place on your watchlist for the foreseeable future until there is confirmation otherwise. Be sure to trade smart and off key levels, not off hope or anticipation of what you think the market could or should do.
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