Ever since a hefty fall from the middle of September to the middle of October, the stock market has been climbing with only 3 negative days out of 11.
In fact, the S&P 500—the benchmark representative for the overall market—has reached back up to right near the 2,000-level once again.
But here is why this climb isn’t quite as bullish as it may appear…
Obviously we can’t discount the fact that the market has indeed hit a significant recovery after it’s big drop in the past couple of months.
However, everything may not be quite as great it seems when looking at how the market is acting, and how investors are pushing the market up.
Here’s why…
Over this recent time period of climbing for the market, the two sectors that have clearly been the strongest are the utilities and healthcare sectors. So why does that matter?
Well, those two sectors are historically defensive!
That means that investors are flocking to two areas of the market because they aren’t convinced that the stock market is ready to be that raging bull it was before just recently.
As for what makes a stock defensive, the general saying is that if you can eat it, drink it, or smoke it, it’s defensive. All that basically means is that anything defensive is something you probably need in any market.
That’s why utilities is a defensive sector.
Some people may live in places without electricity, gas, and water, but that fraction of the population is tiny. Therefor, water, gas, and electric stocks are defensive.
On the other hand, healthcare has evolved somewhat from the defensive sector it has historically been. This is no longer a cut and dry defensive play, but it hasn’t completely shaken this characteristic either.
And when both healthcare and utilities are sitting atop the board in terms of sector strength, we can clearly see that defensive stocks are leading the way right now.
Now, this could be a sign of a bear market drawing nearer, but there is no concrete evidence of one just yet. But if you want to know when to spot the start of the bear market in order to protect your positions and profit, that is taught in our Stock Code Breaker course.
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