After leading the market through the month of May, defensive stock sectors are selling off aggressively this week. Monday saw the health care SPDR (XLV) gap down from last week’s level on heavy volume. Today we had a similar high volume drop in the consumer staples (XLP). This came as the Goldman buy call on commodities pumped up those parts of the market.
Is this the beginning of a rotation back out of defensive and into aggressive positioning? Not sure I buy it. Those markets had gotten pretty extended, and it wasn’t much of a pullback. My take is that there is likely more selling to come in the commodities (subject to revision, as always, upon any geopolitical blowup).
I am long both XLP and XLV, and will now have them on a very short leash.