Technical signs have been flashing buy, buy – for certain groups. These are categories of stocks that have been pummeled last year and in the recent sell-off. These include industrials, materials (including oil and gas), but of course when these turn around, the relief will be positive for most stocks. However, a few categories that have been seen as safe-havens may not do so well. These have been bid up during this correction to rich valuations and may have to come back down. These would include utilities and staples and of course U.S. Treasury bonds.

Technical analysis is not perfect; no forecasting tool is. However, at major turning points our experience tells us that this tool is pretty good. We back the use of technical analysis with fundamental research. And that tells us that the economy is actually in good shape. Companies, excluding energy and materials are continuing to see earnings gains. Those gains should accelerate as the year progresses; especially if the negative sectors get any kind of relief.

This is no time to bail, but instead it should be one to buy.

Remember, “buy low – sell high.”

El Solo Toro