BUY XLU, XLP
AVOID/SHORT : XLF, XLI, XLK
Tough market. Every time prices seem to be on the edge of a larger decline, we see huge snapback rallies, and despite it being on low volume or poor breadth (Less than 3/2 positive) or Short covering (Goldman’s Most Short Rolling index up 1.50% today), it still complicates the picture a bit more but serves to get more shorts OUT of the market when the technical picture really hasn’t improved that much at all.
Financials and Industirals are still having difficulty at key trendlines and are both DOWN today. Discretionary has fallen for 8 of the last 11 days, with Auto, Casino and housing weakness, while the Staples continue to look quite attractive as do the Utilities, technically. Technology managed to hold where it needed to initially and now has snapped back.. though momentum is negatively sloped and the group remains vulnerable to a larger pullback. Yet, stocks like AAPL, AMZN, NFLX, FB are all up 1% or more, and important to see some evidence of this trade dying before calling for the larger top in Tech. All that can be said for now is that Tech has lost quite a bit of momentum and this group remains paramount to thinking themarket can either rally, or decline given its 26% weighting in SPX. At present, momentum does not support the idea of a push back to new highs for Tech, but that this bounce is completing a symmetrical “right” shoulder type move and should end in the days ahead and give way to a pullback down to recent lows.
Some charts below to put this into perspective
S&P- HOURLY- Rally should find resistance between 2830-7
NASDAQ- Still tough to think this early sharp rally has any real staying power and should be growing near resistance at 7385-7400 as part of an ABC type bounce after the 5 wave decline