Here’s strong evidence that stock prices haven’t yet peaked By: Mark Hulbert | September 19, 2017
U.S. market sectors’ recent performance favors the bulls
U.S. stock-market sectors are telling a bullish story. That’s because the sectors that typically perform the worst prior to market tops are quite strong right now. And those that historically have performed the best prior to tops are currently ranked no better than in the middle of the pack.
The research on which I base these comments was conducted by Ned Davis Research. They looked at the performance of each of the S&P 500’s SPX, +0.15% 10 major sectors during the last three months of all bull markets since 1970. The sectors that performed the best, on average, were Consumer Discretionary, Consumer Staples and Health Care.
As you can see from the chart below, the first two of those three sectors are in 8th and 9th place currently for performance over the past three months (according to FactSet).
In contrast, the sectors that on average have performed the worst prior to market tops are Financials, Utilities, and Energy. Based on the last three months’ returns, those sectors are in the 4th, 6th, and 7th place, respectively.
Of course, the sectors’ relative returns are not a foolproof leading indicator of stock market tops; there is no such indicator. But I do note that they did a creditable job alerting investors to the market top in May 2015. You may not recall that the market formed a major top that month, but it did, according to the bull- and bear-market calendar maintained by the Ned Davis firm. Though the S&P 500’s drop from then until the February 2016 bottom didn’t satisfy the semi-official bear market criterion of a 20% or greater, a number of secondary stock benchmarks did. The Russell 2000 index RUT,
In a column I wrote in April 2015, I argued that the sectors were signaling an imminent top. That’s because a sector ranking based on trailing three-month return more or less perfectly matched the historical pattern.
Assuming the future is like the past, therefore, a bull-market top is at least three months away.
If you want to track this indicator yourself, keep a close eye on the trailing three-month sector rankings. Be on your guard for a potential top whenever Consumer Staples, Consumer Discretionary and Healthcare lead those rankings while Financials, Utilities, and Energy are at the bottom.
Market Data 
Markets 
AI
