Specifically, three major exchange-traded funds ("ETFs") tracking the broad market S&P 500 Index, the small-cap Russell 2000 Index, and the tech-heavy Nasdaq 100 index all earned "neutral" ratings from our system. That's still true today.
Not surprisingly, the market turbulence has continued since then. And that has investors spooked.
A lot of it comes down to this earnings season. Yesterday, I explained that I would be watching two specific stocks for insights into consumer spending. And I said that traders are asking the market to thread a needle.
Put simply, Wall Street wants lower inflation and continued consumer strength. Consumer strength would show up in big earnings performance – and that's what traders want to see.
We're now seeing a sell-off as the market processes these complicated conditions. And that means some investors are thinking about seeking shelter from the market storm.
Well, the Power Gauge is warning against traditional "storm shelters" right now. In fact, some of them are about as "bearish" as it gets.
So before you go moving money to "defensive" positions, let's first take a look at these storm shelters in the Power Gauge...
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Now, you probably already know the three traditional defensive market sectors. I'm talking about utilities, health care, and consumer staples.
All three are considered "noncyclical." And because of that, many investors expect these sectors to avoid damage in downturns.
But that's not what we're seeing today.
In fact, the Power Gauge puts two of these sectors in "bearish" territory right now.
We'll start with the worst of the bunch – consumer staples.
In the Power Gauge, we measure this corner of the market with the Consumer Staples Select Sector SPDR Fund (XLP). And as you can see from XLP's Power Bar rating, its "bullish" to "bearish" ratio is about as bad as it gets...
Only two stocks earn a "bullish" or better rating. And 25 are in "bearish" territory.
Looking at health care stocks, we see a similar setup. Take a look at the Power Bar for the Health Care Select Sector SPDR Fund (XLV)...
This time, only three stocks earn a "bullish" or "very bullish" rating. And 21 are rated "bearish" or worse.
The best of the bunch is utilities. But based on the Power Bar for the Utilities Select Sector SPDR Fund (XLU), it's still pretty grim...
As you can see, four stocks are in "bullish" territory. And eight are rated "bearish" or worse.
Keep in mind that this is a very high-level overview. But the takeaway is clear...
Now is not the time to put your head in the sand with these traditionally defensive sectors.
Today, we're seeing broad concern from Wall Street. And contradicting expectations for lower inflation and continued consumer strength are likely driving the cautious behavior.
Put simply, everyone is waiting to see how this earnings season plays out. We'll need to see some positive numbers before things get moving again.
Fortunately, we'll have answers soon...
As earnings season kicks off, we'll first get results from some of Wall Street's biggest financial names. They include JPMorgan Chase (JPM), Wells Fargo (WFC), BlackRock (BLK), Citigroup (C), Charles Schwab (SCHW), and Bank of New York Mellon (BK).
Clearing that hurdle will help guide the market going forward. And that's exactly what we need right now.
So, if you don't normally keep your eye on the earnings calendar... I recommend you do so this season. It's "make or break" for this market.
In the meantime, beware of the traditionally defensive sectors. The Power Gauge says they aren't the storm shelters you would expect them to be.
Good investing,
Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.52%
9
13
8
S&P 500
+0.14%
65
266
167
Nasdaq
-0.09%
13
53
34
Small Caps
+1.14%
305
1111
484
Bonds
-0.16%
Utilities
+1.31%
4
20
7
— According to the Chaikin Power Bar, Large Cap stocks are more Bearish than Small Cap stocks. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Energy
+3.73%
Materials
+3.01%
Industrials
+1.62%
Health Care
+0.21%
Real Estate
+0.1%
Financial
-0.17%
Discretionary
-0.33%
Utilities
-0.46%
Staples
-0.97%
Communication
-2.36%
Information Technology
-2.65%
* * * *
Industry Focus
Insurance Services
2
33
18
Over the past 6 months, the Insurance subsector (KIE) has outperformed the S&P 500 by +4.00%. However, its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #16 of 21 subsectors and has moved up 2 slots over the past week.
Indicative Stocks
AFL
Aflac Incorporated
AIG
American Internation
AJG
Arthur J. Gallagher
* * * *
Top Movers
Gainers
URI
+5.91%
CE
+5.37%
BLDR
+5.31%
VST
+5.17%
MDT
+4.23%
Losers
LLY
-6.59%
CRL
-6.34%
BIIB
-4.74%
LVS
-3.99%
REGN
-3.63%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
C, JPM
BK, BLK, GS, WFC
KMI
No earnings reporting today.
Earnings Surprises
No significant Earnings Surprises in the Russell 3000.
* * * *
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