The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- One of our key forecasts for 2011 has been that the second half of 2011 would be stronger than the first half of the year. While we have seen, and continue to see, signs of an impending correction, we also note that we are close to entering the second half of the year.
We have noted a couple of changes in the markets in recent articles. One of these is that
signs of strength in the U.S. Dollar suggest that foreign money is coming into our markets
. One question recently asked on our conference calls is, "What sectors will lead in the second half?" We have been overweight Consumer Staples
and Consumer Discretionary
for a while now, an unusual allocation given this year's infatuation with Technology
, which has lagged.
XLE contains many of the bigger name oil stocks that foreign investors would likely buy to invest in U.S. stocks in that sector. In addition, examination of the two ETFs shows that XLE is outperforming. Note the slight undercut of the March lows on XLE, while the undercut of those lows is more pronounced on OIH (XLE has already moved back above, while OIH remains below, those lows). We show some attractive stocks in XLE below:
OIH type stocks should be considered, but could underperform as these may be riskier. Still, for diversification we would consider the following constituents:
Ordinarily, we like to buy the strongest sectors, but there are some signs that the energy sector could be a market leader in the second half of 2011. Should the market embark on a second-half rally, we will monitor the performance of these sectors in
. We mention, though, that this sector is the most promising of our equal weights.
Fred Meissner is founder and publisher of
. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report. A detailed bio is here: