Ominous sign

The market has finally broken down from its recent top around 4640ish for S&P and then got a haircut by 100 points within two days. I opened numerous trades for shorting S&P at various levels. While not all of them worked out in profit, most of them rewarded me quite well with such a swift downdraft. Although we may see a bit of a bounce from here, I don't think the mini correction is down. Any early rally next week will likely be followed by another selloff.

For the longer term in a few month time, the risk in general is even bigger. Below is an analysis on this mega risk from an interesting perspective. Thought to share with you. 

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Over the past six months, the Consumer Staples Select Sector SPDR Fund (XLP) is up roughly 10%. This exchange-traded fund ("ETF") is packed full of defensive companies...

Its top five positions are Procter & Gamble (PG), Costco Wholesale (COST), Coca-Cola (KO), PepsiCo (PEP), and Philip Morris International (PM). The ETF also holds other big names like Walmart (WMT), General Mills (GIS), Hershey (HSY), and Colgate-Palmolive (CL).

Consumers won't stop buying from these companies unless the world comes crashing down. The products they sell are "essentials" – like toilet paper, cereal, and toothpaste. That's what makes them perfect defensive investments in hard times.

The S&P 500 Index, our broad measure for the stock market, is only up around 6% over the same six-month period. In other words... consumer staples are outperforming the market.

Now, I should be clear... That doesn't mean a bear market is imminent.

But it does mean that Wall Street's brightest minds think now is a good time to prepare for one. And when that's the case, you'd better make sure you're preparing, too.

Fortunately, consumer-staples stocks are a great way to do that...

The following table shows how XLP, the S&P 500, and the tech-heavy Nasdaq Composite Index all fared during three major sell-offs over the past couple of decades. Take a look...

The data makes it clear... When the market falls apart, consumer staples hold their footing.

Sure, the sector fell during those three sell-offs. But in each case, the declines weren't as bad as the incredible destruction in the broad market and tech stocks.

That's an ominous sign.