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3 Reasons the Selloff Isn’t Finished

These signals are flashing a warning to investors

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Cyclicals vs. Defensives

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Another way to gauge the health of the market is to look at which sector groups are leading, and which are lagging. Since the beginning of the year, utility stocks have been the stars with the Utilities SPDR (XLU) up more than 8% while the overall market is struggling to stay in the green year-to-date.

As a proxy for how aggressive investors are feeling — and thus, how confident they are — I like to watch the ratio of the Morgan Stanley Cyclicals Index vs. the Consumer Staples SPDR (XLP), shown in the accompanying chart.

Here’s the kicker: The ratio is rolling over to an extent not seen since March 2013 as investors move into safe havens.

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