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The Lead-Lag Report: October Correction Warning


Market internals have markedly deteriorated, as the odds increase for an October correction. Beware the message of the bear trade.


Consumer Staples (NYSEARCA:XLP) – Defensiveness Increases

Comments: Consumer staples continue their strength in sympathy with Treasuries, health care, and utilities, as money takes itself off the table following the Fed's QE3 announcement. The surge is troubling, and may be warning of a potential correction in equities for October.


Consumer Discretionary (NYSEARCA:XLY) – Down Again

Comments: Last week I stated, "Discretionary stocks remain in the leadership category, but I maintain that the group is tired. A recovering housing markets and pledge by the Fed to do whatever it takes to bring joblessness down has bolstered the group, but performance is extended." It appears that weakness is now setting in. The sector remains one to be bet against on the short side, and avoid on the long side independent of any kind of wealth effect the Fed's QE3 program creates.
No positions in stocks mentioned.

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