One day does not make a correction, but certainly a couple of weeks indicates that there is a slowing of the amazing tone deafness of the SPX to the movements in bonds and the emerging markets. Here is our old friend, XLU:$SPY which highlighted that investors were over allocating dollars to the defensive utility sector relative to the SPY.
Even though the SPY continued to move to “all-time highs” XLU began to beat the performance of the market in the last several months. I am now looking for a quick snap fall here over the next week, a display of resilience that powers us up to highs, and then a brutal fall through the summer.
As you look at the chart that I posted many weeks ago, the XLU:SPY was signaling a turn way ahead of this weakness. We’ve been looking for a confirmation. The transports were battered, and perhaps have a bit more to go before reversing higher in the short term
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