Welcome to Extreme Investor Network, where we provide you with unique and valuable insights to help you navigate the world of investing. Today, we are diving into the utilities sector, which was the only S & P 500 sector with a positive return in April. Its defensive qualities in a weaker market helped drive this success, and we are seeing a strong start to May as well.
One key player in this sector is the Utilities Select Sector SPDR (XLU), which has recently experienced a bullish long-term momentum shift. This shift is marked by a pending ‘buy’ signal on its monthly MACD, following a ‘sell’ signal that had been in place since Q3 2022. The breakout above the weekly cloud model has reversed the cyclical downtrend that had been present since late 2022, signaling a transition to a cyclical bull trend within a larger secular bull trend dating back to the 2008 low.
While XLU shows signs of upside exhaustion on its daily chart and faces resistance near a Fibonacci retracement level, we anticipate a short-term consolidation phase before further upside. This period of digestion can be a great opportunity for investors to add exposure to utilities and take advantage of this new cyclical bull trend.
In comparison to the S & P 500, XLU has seen intermediate-term momentum shift positive, suggesting that it is poised to outperform the broader market when its corrective phase resumes in the coming weeks. This outperformance could be amplified by a potential decrease in Treasury yields, as utilities are sensitive to interest rate changes.
As always, it’s important to do your own research and consult with a financial advisor before making any investment decisions. Stay tuned to Extreme Investor Network for more unique insights and analysis to help you make informed investment choices.
