It was a back and forth week with Technology (XLK), Utilities (XLU) and Energy (XLE) all fighting for the top spot. Even Industrials (XLI) made a late effort to end the week at the top.
In the end, the safe haven of Utilities (XLU) won the week as investors fled more volatile stocks for something that everyone needs going into the winter. Heat!
Remember that narratives will be constructed every day in financial media based on emotions. The problem with this strategy is that they have already happened! It has already shown up on the chart. So today, we are going to look at one of the most important intermarket relationships. That is Consumer Discretionary vs Consumer Staples, or XLY/XLP. Let’s hop onto...
Previous idea suggested a possible move to MA50 daily. Chart looking bullish, could break higher from here. Next targets $0.22 and $0.26.
Falling wedge on the weekly. A break above that upper trend line would imply that we caught the bottom. I still had an order for another tranche at $0.11. DOH!
The Dow is lagging our other indices in our tech-heavy environment. Technicals are ripe for a play. 27900 28020 & 28400 resistance range. Bullish pattern setup with inverted h&s and hugging the downtrend breakout. Potentially an ascending triangle forming-- Let's see if the bulls can break up. Play break out or short the rejection.
Technology vs. Consumer Discretionary
Are we about to see a significant change in the performance of this ratio? CD outperforming wouldn't necessarily spell trouble for the broad market, but is it seriously time to consider being underweight tech?
XLY terminal push into wave v is facing a wall of parallel channel and fib Resistance zones into 134. Also, notice the impulsive 5 wave pattern facing significant resistance into current levels. For now, the 136 should offer massive resistance that setups for a 15%-25% decline.
COVID-19 resulted in Online Retail ETFs reaching new all-time highs on a relative & absolute basis.
Online Retail/SPY has been known to move similarly to CD/CS.
We've seen CD/CS break diagonal resistance, but remains below its June 2018 ATH.
EW CD/ EW CS is still heavily lagging and well below its June 2018 high