The bullish percents are headed lower which means the broad market is experiencing some selling pressure. If this indicator keeps going lower then at some point the general market indexes will head lower as well.

However, the SPX hasn’t even broken below the 20-day yet. The market is a bit oversold based on the PMO indexes, so when we finally get the rate hike who knows what will happen.

Tuesday – Rates

What is this spreadsheet telling us?

Right off the bat, I see a number of blue rectangles which means that the entire group of fixed income and high yield ETFs is gaining strength against the universe of ETFs.

This is what I would expect to see considering that the inflation-sensitive, commodity-related stocks are losing strength across the board.

So, as active investors, do we scale back on energy and materials stocks and re-deploy into high yielding ETFs such as the ones shown below?

I have already sold my inflation-sensitive stocks and ETFs, so that is a done deal. But I am not quite ready to buy these ETFs with the cash I raised from my sales. I think I need a little more evidence.

Before buying Utilities, for instance, I would like to see XLU outperforming SPY, or at least getting close. Also, I would like to see TLT come to life a bit.

One thing that is bothering me is the weakness in the REITs. Maybe it is nothing, or too early to be worried, but these two ETFs should be trading in similar patterns. Are REITs suffering from the problems in retailers? If so, how big of an issue is it?

When I look at this chart, it looks to me like utilities are ready to challenge new highs, whereas REITs are headed towards a test of the lows.

The Short-Term Trend

The medium-term is overbought and we are all looking for the signs that the market is topping out.

But the market is oversold short-term based on the PMO index, so we are on watch for the next short-term uptrend.

For an active investor, this is a tough spot, but we have been here many times before over the years. We just have to be patient and wait, and let the market tell us where it is headed next.