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) , Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) ) over regionals (SPDR KBW Regional Banking ETF (KRE) , KeyCorp (KEY) , Regions Financial Corp. (RF) and Bank of the Ozarks Inc. (OZRK) )"
  • Utilities: "Expect oversold short-term bounces to be short lived: Utilities SPDR ETF (XLU) , Duke Energy Corp. (DUK) and NiSource Inc. (NI) )"
  • Healthcare: "Biotech revisited: Continue to accumulate Regeneron Pharmaceuticals Inc. (REGN) , Biogen Inc. (BIIB) , Gilead Sciences Inc. (GILD) and Celgene Corp. (CELG) on recent pullbacks."
  • Retail: "Recent oversold counter-trend rebounds failing at downtrends: SPDR S&P Retail ETF (XRT) , Ralph Lauren Corp. (RL) , Tractor Supply Co. (TSCO) , Target Corp. (TGT) -- Favor Amazon.com Inc. (AMZN) "
  • Technology: "Accelerating ideas following Summer consolidation/pullback: Alphabet Inc. (GOOGL) , Broadcom Ltd. (AVGO) , Tyler Technologies Inc. (TYL) , PTC Inc. (PTC) ."
  • Airlines: "Use pending short-term pullbacks to accumulate as Delta Air Lines Inc. (DAL) and JetBlue Airways Corp. (JBLU) 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) , SPDR S&P Oil & Gas Explore & Prod. ETF (XOP) and Vaneck Vectors Oil Services ETF (OIH) ."

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:

More from Stocks

Texas Fund's Soured Bet on Exotic-Country Stocks Takes Further Hit

Texas Fund's Soured Bet on Exotic-Country Stocks Takes Further Hit

Johnson & Johnson Stock Presents a Buying Opportunity Amid an Overblown Selloff

Johnson & Johnson Stock Presents a Buying Opportunity Amid an Overblown Selloff

Johnson & Johnson - Round 2 - More Selling Pressure

Johnson & Johnson - Round 2 - More Selling Pressure

Dow Slumps Further as Wall Street Grapples With Growth Concerns

Dow Slumps Further as Wall Street Grapples With Growth Concerns

Sell Apple's Suppliers in Asia as Holidays Fail to Bring Cheer

Sell Apple's Suppliers in Asia as Holidays Fail to Bring Cheer