BTIG's Julian Emanuel sees a popular S&P 500 group sitting out the next leg of the rally.
The firm's chief equity and derivatives strategist believes homebuilders will have a rough time after Wednesday's Federal Reserve decision on interest rates.
"They [homebuilders] benefited first from the plunge in long-term yields which we think ended in August, and then in September and October from the actual rate cuts that started in July," Emanuel told CNBC's "Trading Nation" on Monday. "We think the short end of the curve is likely not to be so supportive to the group, and [on] the long end, we see yields moving back towards 2% or higher in the months to come."
The iShares U.S. Home Construction ETF, which tracks the group, is up 49% this year. But there may already by rumblings of some trouble. It fell 1.7% on Monday.
"The group has done very well," said Emanuel. "We think it's time for a pause."
Emanuel, who's a long-term bull, is also on pullback watch when it comes to the overall market.
After hitting its first all-time high since July 26 on Monday, Emanuel warned the S&P 500 could drop 6% to the 200-day moving average of 2,875 in the next week or two.
His catalyst: what the Fed says about the future of rate cuts.
"What we think you see from the Fed on Wednesday is what we would call a hawkish cut," said Emanuel. "The Fed wants to get away from the markets' expectations of further rate cuts. They're likely to say something along the lines 'we've given you three cuts, now let's see how the economy responds.'"
Emanuel is urging investors to view potential market weakness as a buying opportunity. He expects the S&P 500 to "easily" surge to 3,250 in the first half of next year, a 7% jump from current levels.
And, he has a game plan to profit.
"The place you want to rotate into is financials which are really going to benefit from the steepening yield curve," said Emanuel, who also likes energy and international equities, particularly emerging markets and Europe.
