The Canadian $TSX may still look bullish, but that is not where the money is flowing too, it shows where the money has been.
Two charts this week show breakouts. REITs and Utilities.
The chart above shows the Relative strength of the Canadian Utilities compared to the $SPX. You can see an uptrend since March, but the breakout happened last week on this weekly chart. We can see the 200 DMA being broken and starting an uptrend. This is very bullish utilities.
Here is the REIT ETF.
Do these charts matter?
Here was the energy sector a month ago when we were talking about Encana, Cenovus, $NATGAS.
When entire sectors or industries in the case of REIT's start to outperform the $SPX it can be very powerful. The fact that defensive sectors like REITs, Utilities and Energy are starting to outperform tilts the field towards defense.
This is a map of the sector rotation model. At the stock market top, the energy sector gets a lift, and the market rolls into defensive sectors like Utilities and REIT's. It rolls out of things like cyclicals,broker dealers, industrials and banks.This chart suggests it is time to rotate into defensives.
Good trading,
Greg Schnell, CMT
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