Weak Defense

June 24th, 2011
in contributors

hard hats  Guest Author:  Chris Kimble  (See About the Author end of article.)

Note:  This is a cross post with Advisor Perspectives dshort.com

Often investors and investment professionals use so-called "Defensive Sectors" to help reduce downside risk to an overall portfolio. This idea helped for a good while back in 2008, yet once these Defensive ETF's started breaking support, they fell a ton along with the broad market.

Follow up:

The chart below is a 3-pack reflecting three so-called Defensive ETFs: Consumer Staples, Healthcare and Utilities.

As of the past couple of days, the Utilities ETF/XLU has broken key support, with Staples and Health care pushing support to an extreme. If investors/professionals are using these ETFs, a big caution sign will go up if support is taken out, not only towards these three, but the broad market as well. Remember, once the defensive plays started to breakdown in 2008, major weakness was seen across the board.

What happened in 2008 that could be happening right now? Something that could trigger the defensive issues to fall? Put your hard hat, because the U.S. Dollar is creating a series of higher lows!

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About the Author

For the most up-to-date Kimble analysis, check out Chris's blog:   Kimble Charting Solutions

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