3 overbought US sectors to watch in the months ahead
Everyone is curious to know how the stock market will react to the debt ceiling deal announcement that happened over the weekend. Republicans and Democrats have reached an agreement, but we are yet to see the stocks’ reaction because the Memorial Day holiday was on Monday.
The debt ceiling uncertainty was a drag for US stocks. However, not all stocks have had a tough time in 2023. In particular, three sectors have outperformed and have now reached overbought or extreme overbought levels:
- Communication services
- Consumer discretionary
The technology sector (NYSEARCA:XLK) is up over 41% YTDCopy link to section
The technology sector outperformed in 2023 and gained over 41% YTD. And rising.
However, it currently trades at more than three standard deviations above its 50-day moving average, meaning it has reached extreme overbought levels.
Communication services (NYSEARCA:XLC) has reached extreme overbought levelsCopy link to section
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At the current levels, the sector trades in extreme overbought territory as well, two standard deviations above the 50-day moving average.
Consumer discretionary (NYSE:XLY) is up 23.58% YTDCopy link to section
The last sector trading in the overbought territory is the consumer discretionary sector. It gained 23.58% YTD and trades at around two standard deviations above the 50-day moving average.
Caution is needed as these three sectors outperformed and are in overbought or extreme overbought territory. Is it time to rotate into oversold sectors?