today when you go to like maybe like a cocktail party somebody says how many months has the S&P 500 been up you're going to say it's been up nine in the last 10 months Amaze your friends but your next guest says September setup looks more Treacher treacherous he said for stocks and he spies one sector that could be vulnerable to a pullback let's find out what that is Jonathan krinsky Chief Market technician at b g joins us now Jonathan suspense is killing me what is that sector hey Brian so the sector is the consumer staples
sector it's been um uh really strong of late and so much so that the weekly RSI which is the relative strength index a gauge of momentum um is above 74 it's the highest it's been in 10 years and so we look back since the year 2000 whenever the xlp that's the ETF for the consumer staples ETF whenever that Weekly RSI has been 73 or higher like it is right now the average return looking out 1 to 8 weeks has been pretty negative uh two we Returns on average have been down about 2.4% down seven to
the last 10 times and you know that's not a big move um may not sound like a big move but for the consumer staples which is a lower beta lower volatility group that's a decent move and so you know I think structurally this the Staples chart looks still pretty good but I think tactically as we head into September it's it's a group you may want to uh pump the brakes on here does it look like it's just like too red hot in a shortterm for and and it's still a solid long-term setup or probably most
of the gains have already been made no I I think I think like that's that's your point structurally I think it's still fine this is more if you know if you've been um a little more Nimble a little more tactical you know and you you've been in the Staples trade for the last couple months maybe take some chips off the table and look to reset it um as we pull back I think you know there's been a lot of uh we'd call it pre-trading the rate cut move and so I think um you know they
maybe benefit ited from that but we actually think as you get into September rates are actually set to move higher and that could also be a headwind for the Staples sector okay what about you got a view on the macro Market or any other sectors I know all we've been talking about is AI and inv video and everything like this but there's some other things that technically at least to my semi untrained eye look at biotechs there are things that are in the market that we've kind of been ignoring yeah I mean you biotech's been
kind of consolidating for the last couple months um under under key resistance so that's poised to potentially break out um Industrials have been very strong both equally encap um that's a sector that just hit new all-time highs this week so there's things that are making new highs even though the S&P itself continues to struggle um sitting just below those those prior highs actually the equally weighted S&P 500 also did make a new high so things are happening below the surface even though the S&P itself just kind of looks a bit stuck here yeah certainly is
um you know I know you're a technician obviously so you're looking at at charts but you got the fundamentals that are sort of layering on top of it how much are you following the fed and bond yields if at all yeah no that that's a that's definitely a key part of our our work and we think you know what was interesting is when stocks rallied off the August lows um a big part of it seemed to be that the economic data was improving um and we've gone into an environment where good news is perceived as
good news so that made sense but what was what was notable is that bonds also rallied on that perceived better news and you know if they were rallying during the August volatility on the bad economic news it didn't really make sense to us that they would also rally on the good economic news and so we've been saying to fade the strength in bonds especially as we get into September which is um September October are the two worst months for bonds surprisingly maybe um you know October has been down the last n years for for bonds
September pretty much the same so we think bonds are a fade here um and I think some of the some of the buying and bonds was again front running an anticipated Fed rate cut so you could see a sell the news there we think stocks probably hold up better um you might have to wait till the back half of September broadly before volatility reemerges there for for the equity Market
