When traders start buying defensive stocks this should be a stop sign for investors. One should ask how long do these traders plan on holding these stocks. It is always good to get a reference point to see where they think the market will turn around. This way one can study the technicals and try to find some sort of rationalization in this market. In the next few weeks when kids go back to school, the market could jump due to cyclical buying. This means investors or traders believe the winter months could bring profits to certain companies. So, September and October could be rally months and then sell-off before the holidays. Companies like Staples may get a jump in earnings due to back to school sales. Does this mean all defensive or cyclical stocks will be up? No, this means trends have formed in the past with various stocks at certain times.
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