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It is often convenient to dismiss any constructive price action in the more defensive areas of the market with the blanket statement of it being simply “investors chasing yield,” or “fleeing to safety.” In reality, though, not all high yielding, traditional safe havens of the market perform in unison. Recently, the utilities have been more impressive than the general consumer staple ETF, XLP. Actually, to drive a point home, even in the tobacco space stock picker’s who selected LO MO and RAI have seen a much better performance than those who picked PM. So, brushing aside all high yielding defensives as being in the same boat usually just illuminates a lack of effort and focus.
Currently, the utes are running and threatening a major breakout on the weekly chart. You are talking about a possible perfect trifecta of tailwinds, in terms of consolidation in the industry, favorable valuation, and attractive, relatively safe yields. Note the ascending triangle on the weekly chart below of the XLU, as well as D and ED as some of the best performing utes.
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