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 (

The FRED Report

) -- Here at

The FRED Report

we have been looking for a summer rally led by energy, and it now looks as if this is under way. In the

last couple of reports

, we have given some numbers that would tend to confirm the rally for the market and the move in energy is under way, and we will provide readers with those

numbers if you like

. The quick and dirty is that

we believe that a rally to 140 on SPY (SPY) - Get Report would be confirmed with a close above 133.25 on SPY.

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Our favorite sector remains energy

(XLE and OIH). Technology has been coming in with some great earnings as well, but as we have mentioned over the last few months, those stocks are over owned, as 8 out of 10 Wall Street strategists have been overweight Tech. We say this because many of these stocks have gapped up, and then sold off, on earnings news. We show charts of

IYW

(IYW) - Get Report

,

Apple

(AAPL) - Get Report

,

Intel

(INTC) - Get Report

and

Microsoft

(MSFT) - Get Report

below. After some thought,

we remained an equal weight in Tech in the July sector review

.

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We have discussed XLE, and oil in

several past articles

and our opinions remain the same â¿¿

we think it can lead into the end of the summer, and possibly into the end of the year.

Our biggest concern is investor sentiment â¿¿ our sentiment indicators are not consistent with a multi-month up move because they have not gotten to our buying sweet spot

. We mention this because long time readers know our forecast has been that the second half of 2011 would be stronger than the first half. Given levels of investor sentiment, we have concerns that this rally may peter out at the end of summer rather than carry through the end of the year. Please stay tuned on the progress of sentiment as we move into August.

Fred Meissner is founder and publisher of

The Fred Report

. 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:

Fred Meissner

.