If we've said it once, we've said it 100 times, but even so it's still worth repeating -- don't fight the trend.
Whether an up-market or down-market, it has been a consistent early theme of Breakout that trying to catch the very bottom of a dip or every last nickel of a top is not a formula for success, regardless of what your internal compass might be telling you. So with stocks clearly on the defensive and tracking toward their worst monthly give-back in nine months, it's not time to get cute but rather to get smart.
As the president of Global Trends Investments and editor of ETF Trends.com, Tom Lydon spends lots of time looking at -- you guessed it -- trends. And right now the trend is down, and the money flow is clear.
"Sector ETFs are not for the average guy... you have to keep a close eye on them" he says, but right now there's a trend into defensive sectors.
Of the 24 industry groups that make up the S&P 500, nine are offering clear outperformance and gains this month while the headline index struggles. Pretty much anything tied to consumer staples (XLP, PBJ) and health care and biotech (XLV, BBH) is working. Even the Guggenheim Airline ETF (FAA) is working as a play on cheaper fuel.
In the meantime, if you are content to ride out the storm or otherwise unconcerned about the market's short-term gyrations, that's great. Godspeed. If not, and you're inclined to make frequent adjustments, it would not be stepping out on a limb to acknowledge that support has been broken and the trend for now is down.
- S&P 500