This looks bad, and if it continues we get a Quad 4!

Those are the industry groups that printed a 4-week relative strength high today.

What do you see? Defensives (besides Airlines, and they are late runners!) get strong:

Quads from today (yep, XLU joined the party in the Quad 4 Bucket!):

This is the first time since a long time (I think mid 23) where we have defensive Quad 4 industry Groups (XLU, Beverages, Telecom Services etc.) getting strong.

Also, today we had bonds up (e.g. interest rates down) + Dollar down and despite that we had high beta stuff selling off hard (semis etc.).

The problem is, we are oversold, so a rally might come. But if this rally is not fueled by higher beta stuff, do not buy into it!

There is a good chance that this Quad 3 can turn into a Quad 4 (e.g. that those energy names will not help you), which would also mean that the QQQs will not show relative strength as they did in 2023 (so looking at the QQQs short for a hedge).

O.k., o.k., this was only the correlation for one day. But what I want to say is the following:

Watch Quad 4 stuff (= Defensives!), if it gets a bid do not buy into any rally and do not long Quad 4 stuff (they trend terribly and get down with the market even harder after holding up for some time). In this case also get rid of anything related to commodities (yes, Oil + Energy stocks too, just have a look at OXY!).

All the best and best regards.

Andreas

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