Short-term indicators are overbought for small-cap indexes, Fundstrat technical strategist Robert Sluymer said, and most cyclical indicators suggest a pullback is developing over the next two to four weeks.

At the same time, the dollar index "has established a low in the low-90s but is also overbought short-term, having rallied back to resistance near 94," Sluymer wrote. "Expect a shallow pullback."

Fundstrat, the independent research boutique, said investors should favor U.S. equities even with a pullback short-term, as the MSCI EAFE Index Fund has "rallied into heavy resistance while relative performance remains in a longer-term downtrend and is again diverging negatively from its price."

While short-term indicators suggest a retreat, the long-term cycle is intact for the S&P 500 based on momentum, price trends and total returns of stocks vs. bonds, Fundstrat said. Similarly, intermediate-term indicators "continue to build positively from moderately oversold levels following the summer consolidation/rotational correction," Sluymer wrote.

Here are the best ways to use a pending short-term pullback to snag some gains, per Fundstrat.

  • Financials: "After breaking out to new cycle highs in September, short-term indicators are peaking suggesting a pending pullback across the sector. Favor larger-cap banks/brokers (Citigroup Inc. (C) - Get Report , Morgan Stanley (MS) - Get Report and Goldman Sachs Group Inc. (GS) - Get Report ) over regionals (SPDR KBW Regional Banking ETF (KRE) - Get Report , KeyCorp (KEY) - Get Report , Regions Financial Corp. (RF) - Get Report and Bank of the Ozarks Inc. (OZRK) )"
  • Utilities: "Expect oversold short-term bounces to be short lived: Utilities SPDR ETF (XLU) - Get Report , Duke Energy Corp. (DUK) - Get Report and NiSource Inc. (NI) - Get Report )"
  • Healthcare: "Biotech revisited: Continue to accumulate Regeneron Pharmaceuticals Inc. (REGN) - Get Report , Biogen Inc. (BIIB) - Get Report , Gilead Sciences Inc. (GILD) - Get Report and Celgene Corp. (CELG) - Get Report on recent pullbacks."
  • Retail: "Recent oversold counter-trend rebounds failing at downtrends: SPDR S&P Retail ETF (XRT) - Get Report , Ralph Lauren Corp. (RL) - Get Report , Tractor Supply Co. (TSCO) - Get Report , Target Corp. (TGT) - Get Report -- Favor Inc. (AMZN) - Get Report "
  • Technology: "Accelerating ideas following Summer consolidation/pullback: Alphabet Inc. (GOOGL) - Get Report , Broadcom Ltd. (AVGO) - Get Report , Tyler Technologies Inc. (TYL) - Get Report , PTC Inc. (PTC) - Get Report ."
  • Airlines: "Use pending short-term pullbacks to accumulate as Delta Air Lines Inc. (DAL) - Get Report and JetBlue Airways Corp. (JBLU) - Get Report rally from rising 4-year ma's."
  • Energy follow-up: "Short-term momentum continues to peak across the sector following the September surge. Expect shallow pullbacks over the coming 1-2 weeks with key support between 100- and 50-dma's. energy Select Sector SPDR ETF (XLE) - Get Report , SPDR S&P Oil & Gas Explore & Prod. ETF (XOP) - Get Report and Vaneck Vectors Oil Services ETF (OIH) - Get Report ."

Citigroup, KeyCorp, Alphabet and Broadcom are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells C, KEY, GOOGL or AVGO? Learn more now.

Don't miss these top stories on TheStreet: