The long-term market cycle remains bullish and I continue to expect the Standard & Poor’s 500 Index (SPX) to move higher through year-end, punctuated with tactical, multi-month pullbacks. These should be viewed as buying opportunities.

With weekly price momentum and sentiment indicators now in overbought territory, I have fielded a lot of client questions asking how to manage equity exposure at current levels. Both Tom Lee and I suggest investors remain focused on the long-term bullish outlook through 2020 but also to be prepared for temporary choppiness in and possibly through 2Q.

Traders should consider the SPX 15-day simple moving average (sma), currently at 3287, as a reasonable proxy to use as a trailing short-term stop. Sector rotation is likely to intensify late in 1Q and through 2Q. Under the hood of the SPX, sector leadership continues to show evidence of rotating yet again. Outside of technology’s ongoing leadership, cyclicals continue to pause and pullback after their impressive surge through 4Q into 1Q.

In contrast, more defensive, lower volatility sectors, such as utilities, staples, REITs and select healthcare are beginning to rebound after pulling back through most of 4Q.

Netflix (NFLX) is another large-cap growth stock poised to emerge from an...

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