NEW YORK ( TheStreet) -- The most defensive sector in the stock market is utilities and the Dow Utility Average set a multi-year high on Thursday at 512.11, and is up 13.0% year to date. This is no surprise as 90% of all utility stocks are rated strong buy or buy, and includes 61.5% of all strong buy rated stocks.When valuations and ratings set up this way at www.ValuEngine.com, it's a clear signal that investors need to become more defensive in their overall investment strategy.
On the opposite side of the spectrum are the transportation and construction sectors. The Dow Transportation Average was up 18.6% year to date at its March 19 high, and today it's up 13.2% year to date as sell rated stocks spread into this sector. We show that 77.4% of all stocks in this sector are rated sell or strong sell, which is a warning to book profits and raise cash. You can trade transports via the iShares Dow Transports (IYT) ($106.86). IYT closed Thursday below its 50-day simple moving average (SMA) at $107.04 on a negative daily chart. The weekly chart shows overbought momentum, but IYT could end the week below its five-week modified moving average (MMA) at $107.64, which would be the first such close since the week of Nov. 17. My monthly value level is $105.59 with annual and semiannual pivots at $106.22 and $106.95 (both tested Thursday). My annual value level lags at $97.32. The construction sector as measured by the PHLX Housing Sector Index (HGX) peaked at 198.06 on March 20, up 15.6% on the year at that time. Since then HGX is down 7.5% ending Thursday at $183.14, still up 6.9% year to date.
Sell rated stocks spread into the construction sector before HGX peaked on March 20. We show that 60% of all stocks in this sector are rated strong sell or sell, which is a warning to book profits and raise cash.