The Power Gauge Just Spotted a 'Worst to Best' Trap
Something odd has happened over the past month in the market... No, I'm not talking about the dip we saw in stocks. Instead, I'm talking about one of the market's worst-performing sectors.
The Power Gauge Just Spotted a 'Worst to Best' Trap
By Vic Lederman, editorial director, Chaikin Analytics
Something odd has happened over the past month in the market...
No, I'm not talking about the dip we saw in stocks. Instead, I'm talking about one of the market's worst-performing sectors.
You see, that sector is flat over the past six months. That's compared with the broad market S&P 500's Index 9% gain.
Despite that, something strange is going on. Looking at just the past month, this terribly performing sector jumped 9%.
In fact, one subsector in this space soared about 14% in the past month alone.
On the surface, it might look like the start of a major turnaround... and a major opportunity.
But with the help of the Power Gauge, we can see that something different is going on. As I'll explain, it's a "worst to best" trap.
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If you haven't already guessed, today we're talking about the energy sector... and the oil and gas equipment and services subsector.
Put simply, the energy sector has struggled recently.
In the Power Gauge, we measure it with the Energy Select Sector SPDR Fund (XLE). And as you can see from XLE's Power Bar rating, its "bullish" to "bearish" ratio is downright bad...
XLE has only one "bullish" stock in it. And three are firmly in "bearish" territory.
Things look similarly grim when we zoom in on the SPDR S&P Oil & Gas Equipment & Services Fund (XES). As you can see, XES also has a terrible "bullish" to "bearish" ratio for its Power Bar...
But this is where things get strange...
Over the past month, XLE has soared by 9%. Meanwhile, XES gained an incredible 14%.
At first glance, this might seem like an incredible opportunity to bet on a turnaround. But the Power Gauge shows us that there's still something wrong here. Take a look at this five-year chart of XLE with some data from our system...
As you can see, XLE has been largely range-bound since 2023. In fact, the seemly massive move over the past month still falls within this sector's "stuck" range. And XLE is still about 6% below its 2024 peak.
Folks, that makes this a worst-to-best trap.
If you look at the sector performance over the past month, it looks like energy is seeing a big turnaround.
But looking closer, the Power Gauge is "neutral" on the sector. And the long-term chart reveals why.
Now, I believe we'll see another bull run in energy eventually. After all, the supply-and-demand cycle in the sector makes it a near inevitability.
But the Power Gauge is telling us that it doesn't look like we're there yet. It says that what we're seeing today is simply more volatility from a range-bound sector.
So, as exciting as that big move is... I wouldn't act on it. Instead, I'll use the Power Gauge to look for other opportunities.
And I recommend you do the same.
Good investing,
Vic Lederman Editor's note: If you don't already have access to the Power Gauge, you can get it through a special offer...
Right now, you can gain a full year of access to our one-of-a-kind system by signing up for Chaikin Analytics founder Marc Chaikin's Power Gauge Report newsletter. That means access to the Power Gauge's ratings and data on more than 5,000 stocks. And if you aren't satisfied within 30 days, you'll be fully protected by our 100% cash-back guarantee.
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are somewhat Bearish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Information Technology
+3.92%
Industrials
+3.67%
Real Estate
+2.26%
Communication
+2.21%
Utilities
+1.99%
Materials
+1.95%
Financial
+1.88%
Staples
+1.3%
Discretionary
+1.21%
Health Care
+1.15%
Energy
-0.85%
* * * *
Industry Focus
Regional Banking Services
31
86
25
Over the past 6 months, the Regional Banking subsector (KRE) has outperformed the S&P 500 by +1.48%. Its Power Bar ratio, which measures future potential, is Strong, with more Bullish than Bearish stocks. It is currently ranked #10 of 21 subsectors and has moved down 6 slots over the past week.
Top Stocks
BRKL
Brookline Bancorp, I
EGBN
Eagle Bancorp, Inc.
COLB
Columbia Banking Sys
* * * *
Top Movers
Gainers
NFLX
+9.69%
MPWR
+7.98%
MRNA
+7.27%
APH
+7.04%
ANET
+6.85%
Losers
FSLR
-6.33%
EIX
-6.33%
D
-5.33%
AES
-5.28%
PCG
-4.97%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
NTRS
COF, ISRG
ELV
MKC, UNP
CSX
No earnings reporting today.
Earnings Surprises
DFS Discover Financial Services
Q4
$5.11
Beat by $1.75
TRV The Travelers Companies, Inc.
Q4
$9.15
Beat by $2.55
APH Amphenol Corporation
Q4
$0.55
Beat by $0.05
TDY Teledyne Technologies Incorporated
Q4
$5.52
Beat by $0.29
STLD Steel Dynamics, Inc.
Q4
$1.36
Beat by $0.07
* * * *
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