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'All bets are off' for the market until these 3 sectors rally: Strategist

Stocks tanked Wedneday morning, with the Dow (^DJI) opening down 350 points. The Nasdaq (^IXIC) and S&P 500 (^GSPC) also plunged out of the gate. The selling was spurred by renewed concerns about Europe and reports of another case of Ebola in the United States.

Yahoo Finance Editor-in-Chief Aaron Task spoke with David Nelson, Chief Strategist at Belpointe Asset Management about what it’s going to take to reverse the downtrend.

Nelson says that in order to have confidence that we’ve seen the bottom in the market, he needs to see a shift in leadership.

“Right now, we’re being led by utilities (XLU) and staples (XLP),” he says. “We’re not going to be led out of this decline on the backs of ConEdison. It’s just not going to happen.”

So which sectors will revive the bull market?

“We need to see tech, financials and industrials lead the way out of this," he says. "Until that happens, then really, all bets are off.”

In Nelson’s view, a rotation into those sectors will help reverse the current trend of selling into any attempted rally. He points to the recent, consistent trend of early enthusiasm, followed by afternoon selling, and says today’s downbeat start might actually be a good sign for the markets.

“Opening down and closing at a higher level would certainly be a good thing," he says. "For the last week, it seems just the opposite. We have this euphoria in the morning and maybe midday, and then somebody says something and we close at the lows of the day, even if [the comments] are positive.”

Nelson points out that the S&P 500 has fallen through several technical levels in rapid succession - the 120-day moving average, the 150-day moving average, the 200-day moving average – and now he believes the next “line in the sand” could be 1848, which would wipe out the gains for the year.

“Placing big, bold bets at these levels – it sounds great… but we’ve taken a defensive posture at this point.”

Early indications Wendesday suggest others are following a simliar script.