Much too often investors think hiding out in defensive sectors are a safe haven, but if the probability is high for a mean reversion because price is exhausted, know asset class or sector is safe. Remember, cash can be a trade if there is nothing else to invest in. Don’t feel compelled to invest because you don’t want to sit in cash.
In our last column we told readers we wanted to take profits in Utilities because of the fast velocity of the move within the group and the slight weakness we started to see. As seen below ChartLabPro.com proprietary rating value started to decrease slight on May 8 and then the rating value broke below the S&P 500’s rating value.
However, as correlations are now hitting some of their lowest levels in five years as the Fed slow reduces liquidity, we will start to see more sector rotation play’s and cycles will be seen more fully as there is less of a beta grab.
As seen on the bottom of the image we see the Consumer Staples is very strong measured by our rating system and is not showing any signs of weakness. An easy way to play this sector is the ETF XLP.
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