Is This the Confidence Trap That Could Wreck Your Retirement Portfolio?
If last weekend’s tech tariff exemptions teach us anything, it’s this: trying to make near-term market forecasts based on tariff assumptions is a fool’s errand.
But that leaves a big question for active investors near or in retirement: How do you make smart decisions when the market’s running on chaos?
On Monday morning, when all three broader U.S. stock market indexes were in the green, I pulled up the new StockCharts Market Summary page and glanced at the Keller Market Models panel to check the S&P 500’s short-term, medium-term, and long-term trend positions. According to this model’s forecast, the S&P 500, despite its short- and medium-term declines, still has its uptrend intact. If this reading of the market environment remains as is, then perhaps it’s time to look for signs of a major reversal to the upside.
But what if the bullish reversal isn’t broad-based? What if it moves by sectors instead?
One way to check is by looking at the Bullish Percent Indexes (BPIs) within the Market Summary. Here’s what it showed on Monday:
FIGURE 1. BULLISH PERCENT INDEXES. Looking at the sectors—gold miners isn’t a sector—Consumer Staples and Utilities were the two that showed signs of hope.
The BPI is a breadth indicator that tells you the percentage of stocks (within a given index) generating Point & Figure Buy Signals.
An early warning bullish alert is triggered when the BPI is below 30% and then forms a new column of X’s (rises). On Monday, the only two sectors flashing these alerts were Consumer Staples (42.11%) and Utilities (45.16%). However, there’s a less obvious issue here. If the S&P 500’s long-term uptrend holds and eventually pulls the short- and medium-term trends higher, the leadership matters.
Defensive sectors don’t typically drive or sustain bull markets. These sectors are where investors go when they’re playing it safe, not when they are betting on growth. In contrast, sectors like Technology or Consumer Discretionary usually take the lead in a true risk-on environment.
Take a look at the Consumer Staples BPI chart.
FIGURE 2. CONSUMER STAPLES BPI. Watch how price reacts to the support (magenta lines) and resistance ranges (blue-shaded area).
Using the Consumer Staples Select Sector SPDR Fund (XLP) as a sector proxy, watch how its price reacts to key near-term resistance levels (marked by magenta lines) and the support zone (blue-shaded area). The ZigZag overlay highlights swing highs and lows, helping you spot the near-term trend: higher highs and higher lows (HH + HL) signal an uptrend, while lower highs and lower lows (LH + LL) indicate a downtrend. While the BPI for staples is flashing a bull alert, it is price action that ultimately defines the trend and provides the setup for whether to act or sit tight.
Now, switch over to the Utilities sector BPI chart, using the Utilities Select Sector SPDR Fund (XLU) as a proxy.
FIGURE 3. UTILITIES SECTOR BPI. Pay attention to the lower side of the price channel.
While XLU faces a sideways range scenario similar to XLP, utilities are managing to make lower lows. This is why I used Price Channels here, whereas, in the Consumer Staples example, I overlaid a ZigZag line—the channels can better illustrate this subtle detail.
Does this indicate relative weakness in XLU vs. XLP? Possibly, but it depends on whether XLU’s price swings can penetrate the upper channel (resistance) while staying above the lower channel (support), which it previously failed to do.
But to answer the question of relative performance, this PerfCharts shows that XLU has been outperforming XLP—and both have outpaced the S&P 500—over the last year.
FIGURE 4. COMPARING THE PERFORMANCE OF THE S&P 500, XLU, & XLP. Is the Utilities sector overbought or taking a breather?
Whether Utilities have room for further upside is largely dependent on the broader market environment, which, for now, remains unpredictable. So keep an eye on the technical levels instead.
What to Do Now
Defensive sectors don’t lead bull markets; they are the sectors where investors hide out during turbulence. Right now, the market feels less like a cycle and more like a geopolitical chess match, where the moves are unpredictable, unorthodox, and hard to price in. If you decide to go “defensive,” Consumer Staples and Utilities may make sense, but only if the price action supports your goals, and likely only as a short-term play.
That said, if you’re nearing retirement, it’s just as important to keep capital on the sidelines—ready to go on “offense” when the broader bull market kicks back in.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.