Thursday, December 13, 2007

The Flight to Safety is Underway

Below are some charts that illustrate the market is moving into a capital preservation mode.

The health care ETF has been consolidating over the last year. It has recently broken out of the upper channel of this pattern. Considering the economy may be slowing, this is a sector that could benefit from a flight to safety.

The utility ETF has been rising since mid-August. It recently reached a new high but has sold off since then. This sector is benefiting from the flight to safety and the Fed's interest rate cuts. Utilities need a lot of capital and when the cost of capital drops it's easier for the sector to get financing.

Consumer staples are in a clear uptrend as well.

Despite their recent sell-off, the 7-10 year treasury market is doing very well.

The 20+ year sector of the market is still in an uptrend, but this is more suspect now. Prices have moved through resistance established in early March. However, there is still the uptrend that started in late June.

As the dollar has dropped, gold has clearly benefited. Right now it is consolidating in a triangle consolidation pattern.