These 4 Sectors Tell You Where The Market Is Going Next
You must separate the “market” action from sector action.
I say this because
the “markets” are acting fine. All we have seen is a nice low volume pullback
off of near-term extended conditions. As I told you recently, extended markets
do revert back to the mean…which is usually back towards support and/or
moving averages. That is all we have seen so far.
The DOW continues to lag badly. While the S&P broke to new highs, the DOW
hasn’t even come close.
Recently, I stated we could get a pullback in OIL to the low 50s…and then
turn back up. NOT! OIL showed its strength by bottoming in the high 50s before
turning back up. OIL STOCKS remain unplayable except for the momentum crowd as
they are too extended right now. I would not bet against a pullback soon.
RETAIL remains under distribution as many leading names have broke below their
short-term moving averages…and on volume. Since this has been a leading
area, we all need to watch closely.
BONDS have been smacked around lately as yields have spiked. The best thing I
can say is that BONDS are oversold and should bounce soon. It will be the
strength of any bounce that will tell me the next move.
That leads me into all the bond-sensitive areas…that have been twanked. To
show you just how many momentum players are in the game,
REITS, HOUSING, MORTGAGE-RELATED and HOUSING-RELATED areas have all dropped
about 10% in just 3 DAYS. These areas were due for pullbacks…but this is
ridiculous. Keep in mind, on the way up, these areas have been hit like this.
They would then pause, consolidate and then continue their ascent. I am not so
sure we should expect that again. Nevertheless, I would keep my eye on these
areas as they will tell you what the market has in store. I do not believe the
combination of rising rates, rising OIL…and a crapping-out dollar is
conducive for major gains going forward.
C, GE, BAC, GDW, NEW, WB, WFC…you may want to take a gander at the charts of all
these “finance” companies. Yes…GE is a huge finance company. If you don’t
know by now, FINANCIALS are very important to the market’s health. Most in
these areas have either broke down technically or have been rolling over
recently.
Shorter-term, all the areas that have been hit the past few days…are due to
bounce. As I said about the BONDS, I will know a lot more by the strength and
the tone of any bounce.
Gary Kaltbaum