For the last 2+ years the recipe for making money in stocks has been easy. Buy something. Ideally you’d add to stocks on dips for the most you didn’t need to get all that cute. When stocks were lower it was time to add to positions in monster size but buying old highs worked as well. With the S&P500 (^GSPC) higher by almost 45% in the last 24 months any buying point was just fine.
Take it from a greybeard: once a market gets this easy it’s about to get very hard. J.C. Parets of Eagle Bay Capital sees no reason to rush. “Is this a place where we want to be buying markets? I think no,” Parets asks and answers in the attached video. “From a tactical perspective we can probably get long at lower levels.”
Parets thinks a good measure for the market’s next move is the relationship between the Consumer Discretionary Select ETF (XLY) and its Consumer Staple counterpart (XLP).
Money managers have been throwing money into consumer discretionary stocks as the market rolls higher and the economy picks up steam. A change in that trend would be a warning sign that the nature of the market has changed.
One last pick from the chartist is the Health Care Select Sector SPDR (XLV). “Health care looks great. It’s a homerun.” From a momentum perspective that’s the kind of price action investors want to see these. At this point in the stock market rally, frankly just about everything qualifies as a momentum name somehow.
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