Now is the time to be defensive. First the NASDAQ, then the S&P 500, and now the Dow have broken their 40-week moving averages.
All of the major sector indices are below their 40-week moving averages (similar to 200-day averages).
Industrials? Below. Finance? Below. Technology? Below. Energy? Below. Materials? Below. The new Communications index XLC? Dived from the start.
All of the leaders have broken down. The FAANG stocks have been brutalized and entered individual bear markets. Facebook is down -25% (disclosure: I’m short).
These sections of the market look like they are ready to enter their own bear markets. Certainly tech. Certainly finance.
The whole cryptocurrency sector has been brutalized. Bitcoin is down 1/3 in the last couple of weeks and is selling at 2/3 of its 40-week average.
We could well get a bounce, but expect these sectors to trade back toward a 40-week average that is resistance, not support.
The sectors that remain above their averages include:
- Utilities
- Real estate
- Consumer staples
- Health care
And gold may have double bottomed, but is still below its moving average, as is TLT (long-term bonds).
Be careful out there, focus on the defensive sectors. One must assume a downtrend until an uptrend is restored.
There are plenty of options in the four sectors mentioned above, and decent dividends can be found as well, that can rival the 10-year treasury.
This is not investment advice. For informational purposes only.
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