Yesterday on StockCharts.com Arthur Hill took a look at what sectors are showing relative strength.
What he found was that over the very short term–that is from around September 15 or 22 (depending on the sector) defensive sectors such as utilities, health care and consumer staples had bottomed and over the last five days of September they had actuallyout performed sectors such as technology, materials, energy and industrials that have led this rally since March 9.
The slide in those rally-leading sectors hasn’t ben enough to break the medium-term trend for those stocks. That still remains up. And all those sectors finished up for September.
But it isn’t a sign that a rally is just gung-ho to continue upward when the defensive sectors start to show relative out performance.
 That’s often a sign that investors are turning cautious and looking to reduce risk and shelter some gains. (As I wrote yesterday, I think any pull back will be short and shallow but that doesn’t mean that there won’t be one or that I’m right about its depth or duration.)
You can watch this pattern as it develops by tracking the ETFs of the defensive sectors: Utilities Select Sector SPDR(XLU), Consumer Staples Select Sector SPDR (XLP), and Healthcare Select Sector SPDR (XLV).
(I wish I could send you to the post itself but Hill writes for John Murphy’s Market Message and it’s a subscriber only service. Maybe you’d like to subscribe. I do. Go to stockcharts.com and look for Murphy’s technical service in the members area.)
Jim: I have approx. $178,000 to invest, which at the moment is all cash. I plan on using your Picks Portfolio and a select group of mutual funds for that purpose. I would like to access your daily blog to learn of any up to date recommebdations you might have. Can you give the url for your daily blog? Thank you very much for being there to help people like me.
And why do we still pay attention to Mr. Greenspan? In that quote he’s just mouthing the consensus among economists right now. As Fed chariman Greenspan’s great strength was that he had access to more data than anyone else and usually ahead of everyone else. And that he worked incredibly hard at understanding what the data meant. Now I think he’s lost much of that privileged access and he’s out here swimming with the rest of us mugs. Increasingly I find the Greenspan comments mirror the news rather than being ahead of it.
This is from MSN Money
“Former Federal Reserve Chairman Alan Greenspan does not think the stock rally will continue into next year.
“The odds are that we flatten out, even though earnings are doing very well,” Greenspan told Bloomberg Television Wednesday, referring to the stock market’s recent rally. That flattening out will probably “put some sort of dull face” on the economy in 2010, he said.”
Jim, what do you think of Trash & Recycling companies as a safe play in this market. They have not participated much during the rally since March and are at a 25% to 40% discount from their highs. The reason I like them as a defensive stock is because the lack of construction business and decline in commercial is already built in. They remain profitable because Residential service is a guarantee for the most part. Any increase due to the stimulus or increase in construction will go to the bottom line. Also, with recycling, any increase in commodoties, other than oil, will increase profits as well. Government and public pressure will increase the amount of recycling and the major players have the infrastructure to take advantage while the Mom & Pop companies will be forced out of business. Waste Mgmt (WM) also pays a nice dividend of 3.9%.
Hi Jim, the Jubak porfolio has about 70% exposure to the market. Do you forseeing taking profit in more of your picks and convert more holdings to cash?
If I learned anything during the great recession is that patience is a virtue. But I’d love to hear your strategy in the short term.
thanks,