Stocks Push Higher as DOJ Sues to Block AT&T Deal >>> READ MORE

For the Rally to Continue, These 3 Sectors Need to Rebound — and Soon

XLF, XLP and XLU could be sending a warning signal

    View All  

The stock market has overcome a variety of headwinds in its march higher this year, and both mid- and small-caps crossed into record-high territory on Monday.

But underneath the surface, this market is flashing some warning signs. If there’s a meaningful rally in the next one to two weeks, these signals can be dismissed; otherwise investors should consider taking steps to protect their portfolios.

The potential cause for concern is the series of slightly lower highs being printed by a number of key market segments. Even as the charts of headline indices such as the S&P 500 continue to show an uptrend, the same can’t be said for specific sectors like Financials, Consumer Staples and Utilities, which in combination make up nearly 30% of the market.

Just take a look at charts of the Financial SPDR (XLF), Consumer Staples SPDR (XLP) and Utilities SPDR (XLU), shown in that order below.

Alone, any of these charts could be dismissed as an anomaly. But together, they paint a picture of a market that could be gradually losing momentum:




The soft performance of these groups has had an impact on market segments that tend to have a more defensive tilt, resulting in a similar pattern of lower highs for yield-focused dividend ETFs such as iShares Select Dividend ETF (DVY) and low-volatility funds such as PowerShares S&P 500 Low Volatility Portfolio (SPLV).



Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC