We get this at the end of every quarter and every year: a backward-looking piece on the last three months or the past twelve. They say what market showed the best gains, which one was the worst. They show which money manager beat his or her peers and who is in the doghouse. I suppose it is good to get a report card and to check inventory, but a forward-looking piece would be more useful, in my mind.
Right now, we want to try to find what could become the outperforming sectors and stocks for the fourth quarter. One approach to consider would be to check on a number of stocks in each segment/sector to see which ones may be bottoming at the end of the third quarter. These leaders could be the place to overweight in the fourth quarter.
Looking at the market segments from utilities to energy, we are finding more early bottoms in telecom, energy and utilities than we are finding in the financials, technology, industrials and cyclicals.
The iShares US Telecommunications ETF (IYZ), above, has revealed a fair number of early bottoms after peaking in April ahead of the broad market.
Realmoney readers know that we have highlighted a number of promising-looking energy names lately. The Energy Select Sector SPDR (XLE) is shown above, and has not made a new low for the long move down. Sentiment still seems to be bearish about energy names, but that is to be expected.
The Utilities Select Sector SPDR ETF (XLU), above, is displaying a possible double formation, and looks attractive for maybe a third of the individual names we have examined.
Our next installment will be to drill down to some individual names.