Despite what appear to be very bullish charts for the midcaps and small-cap stocks, there are troubling signs that should hold us back from a full bullish commitment. Volume and breadth have been contracting, and most troubling is the enthusiasm for lower-quality stocks while a huge increase in interest rates is occurring. This is supported by a 12% jump in bullish sentiment in the AAII Sentiment Survey, which is a contrary indicator.
Investors who read my Daily Trader’s Alert and my monthly Top Stocks to Buy and Stocks to Sell have, in the past month, been repeatedly warned to get out of long-term bonds and bond funds. In an environment where the market is driving interest rates higher, they carry enormous risk.
Thus, there is little need to list the bond funds that you should liquidate — all of them, except those based on inverse strategies. Meanwhile, investors should avoid “bond proxies” like utilities, real estate investment trusts (REITs), and other sectors that in the past year have appreciated as a result of high yields.
Here is our list of stocks to sell in July: