Rotation to low beta typical over the summer

Seasonal investment experts like Don Vialoux, Brook Thackray and Yale/Jeffery Hirsch note that defensive sectors like bonds, utilities and staples are in favor over the more volatile summer and fall periods. Right on schedule, we can see this happening on the charts. Breakouts by XLU (utilities), XLP (staples) and TLT (long bonds) illustrate a rotation into safety.

TLT LONG
xlu xlp

Meanwhile, higher beta sectors like technology are NOT breaking out – as evidenced by the XLK chart.

xlk

A broad challenge for higher beta stocks is evident via the Powershares High Beta ETF. This ETF, which holds a diverse number of growth orientated higher volatility stocks,  is currently challenging a significant neckline of technical resistance at 21.50-ish. If seasonal tendencies play out as they have through history, it would be expected that that neckline resistance level may fail to break for a while.

high beta

4 Comments

    • Could be the pending Brexit vote that caused this markdown on the EU small capped index–looks to be swinging towards “leave” – but you know how that stuff works–it will swing back and forth. Its a mind-game until its over.
      I’d avoid EU securities until Brexit is settled.

      Reply
  • $NYA:TLT, FAVORING BONDS OVER NEW YORK COMPOSITE STOCKS
    HYG: TLT, FAVORING QUALITY BONDS OVER RISKY ONES
    $TRAN:$UTIL, FAVORING UTILITIES OVER TRANSPORT
    TIP (INFLATION PROTECTED BONDS) CHART GOING UP
    IS THIS A BEARISH SETUP?

    Reply

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