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Will These 2 Sectors Lead the Stock Market Lower?

This key sector continues to be “fragile”

by Bob Stokes
Updated: June 06, 2023

Although it doesn't feel like it sometimes, the U.S. stock market has been in a downtrend since January 2022.

The reason it doesn't feel like it is because the S&P 500 has been in a narrow trading range between about 3700 and 4300 for more than six months -- going back to at least November.

Some observers believe a narrow trading range will persist (Reuters, May 24):

Stocks set for range trading as central banks near end game: Reuters poll

Unsurprisingly, some believe that if stocks break out of this trading range, it will be to the upside.

The strong rally on June 2 -- when the Dow Industrials surged more than 700 points -- certainly lends credence to that bullish opinion.

Of course, there's the possibility that more upside is ahead.

However, in addition to using Elliott wave analysis, Elliott Wave International regularly reviews dozens of market indicators and we see a lot of red flags for the market.

If, indeed, the bear market is not over, which sectors will lead the way lower?

Well, one of the prime candidates is the banking sector.

Back on March 17, the Elliott Wave Theorist showed this chart, which includes wave labels for subscribers, and said:


It is well to keep in mind how fragile the banking system is... [The chart] shows that the banking sector is emerging as a downside leader.

As I write on June 5, there's nothing about the index's price action which would alter our March analysis.

Another sector to keep in mind is technology.

As our June Elliott Wave Financial Forecast noted:

The NASDAQ's recent outperformance is dramatic relative to the market's most senior stock index, the Dow Jones Industrial Average.

Of course, the NASDAQ is dominated by big tech names. If they finally reverse, keep in mind that sectors which lead on the upside often turn around and lead on the downside.

Our June Elliott Wave Financial Forecast has a Special Section on technology, which includes a discussion about the artificial intelligence boom.

Get access to that, as well as the details of our forecast for U.S. stocks by following the link below.

Investors Can Be on the Right Side for a Long Time, BUT...

...When an unexpected major turn arrives -- months (or years) of those gains can disappear.

Indeed, the books of brokerage houses show that this is what usually happens after the completion of most major stock market cycles.

You can be the exception to the rule.

You see, the Elliott wave model delivers high-confidence alerts to major price turns that many others miss.

Learn the current message of the Elliott wave model for U.S. stocks by following the link below.

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