When Staples Lag, Bulls Party

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This week has been a good reminder that down days are just part of bull markets.

Lately, it seems like people are surprised whenever the major averages dip a few points—as if they should go up every single day.

The truth is, the market doesn’t run in a straight line. Minor dips happen all the time, even when the overall trend is up.

It really comes down to sector rotation and where money is flowing.

Watching which sectors lead and which lag tells us a lot about the market’s overall health.

What you don’t want to see is defensive sectors outperforming. That’s when we’d start getting cautious.

We like to track this by looking at Consumer Staples and Low Volatility stocks relative to the broader market.

These ratios have been a great guide this year, helping us stay on track with the primary trend.

When equities are under real pressure, investors hide out in Staples and Low Volatility. But right now, they are not.

For now, these trends remain lower, and until they start moving up again, we don’t see much reason to expect trouble for stocks.

In the meantime, we’ll be focused on identifying fresh long opportunities.

We don’t think it’s time to stop buying stocks at all—maybe just time to start looking in some new places.

Alfonso