XLC - XLG: A February-March Pullback Expected After An Incredible Rally

2024-02-04 04:16:21 ET

Summary

• Large-cap stocks have seen a significant rally, but history suggests a possible pullback in the next four weeks.
• The Invesco S&P 500 Top 50 ETF is overbought and has weak seasonal trends.
• XLG is heavily invested in the Information Technology sector, making it vulnerable to a sector pullback should momentum retreat.
• I highlight price points to monitor.

Large-cap stocks have had a heck of a run. Since the October 2023 low, the S&P 500 is up more than 20% and higher in 13 of the past 14 weeks. It begs the question: Have we come too far, too fast? Is a February and March pullback in store? History suggests that it’s quite possible. According to data collected by technician Steve Deppe, CMT , this situation has happened seven times previously. Over the ensuing four weeks, the SPX has been lower each time, losing 2.2% on average. ...

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