The Dow Jones Industrial Average just lately suffered its quickest 10% drop from an all-time excessive since 1928, whereas the S&P 500 Index slumped much more.
With the market having pared some losses, is this a chance to purchase, or is it time to promote earlier than issues worsen?
We mentioned the (shocking) reply to this query at size here, however it’s protected to say that the majority funding professionals are as confused as the typical investor: To wit:
• J.P. Morgan: “Bull market has not peaked yet” — CNBC, Feb. 12
• Morgan Stanley: “The bull market is in the process of topping out” — CNBC, Feb. 7
Is the bull market over or not, purchase or promote?
The low-risk commerce
Here is one commerce that in all probability presents much less danger and extra upside potential no matter what the broader market does.
Last week’s Profit Radar Report beneficial shopping for the Utilities Select Sector SPDR ETF
Yes, utilities sound boring, however the XLU chart is every thing however boring.
The month-to-month chart, under, exhibits XLU on the backside of a well-defined development channel, with help at 47.60.
From the Nov. 15, 2016, excessive at 57.23 to the Feb. 6 low at 47.37, XLU misplaced 17.2% of its worth.
At the Feb. 6 low, 43% of XLU element shares traded at 52-week lows, 32% traded close to 52-week lows and all elements traded under their 50-day easy shifting common (SMA).
The every day chart exhibits that XLU turned extraordinarily oversold Feb. eight, which marked the closing low.
The solely lacking ingredient for robust bullish bets is a bullish divergence. A bullish divergence happens when worth falls to a brand new low, however momentum or breadth doesn’t. This is typically a sign of underlying power.
Absent of a bullish divergence, XLU might relapse as soon as extra and carve out a fair higher shopping for alternative.
Also, XLU’s dividend yield of three.66% makes it simpler to abdomen any short-term pullbacks. XLU’s most bullish seasonal interval of the yr begins in early March.
The prime 5 holdings of the Utilities Select Sector SPDR ETF are:
2. Duke Energy
three. Dominion Energy
four. Southern Co.
What concerning the S&P 500?
For anybody affected by uncertainty, the XLU commerce is a lower-risk choice to achieve publicity to equities.
For these holding a sizeable S&P 500 place, the S&P 500
is close to a make-it-or-break-it degree, which ought to inform whether or not we’ll see a relapse to check the panic low or new all-time highs. More particulars right here: S&P 500 update — decision time.
Simon Maierhofer is the founding father of iSPYETF and writer of the Profit Radar Report. He has appeared on CNBC and FOX News, and has been revealed in the Wall Street Journal, Barron’s, Forbes, Investors Business Daily and USA Today.