BHT identifies meaningful trends and important supply and demand levels in the financial markets. An understanding of these dynamics will add Alpha to any investment strategy. The following are important factors to consider in the S&P 500 Economic Sectors:
The S&P 500 had a big selloff after failing at the important 2,400 level. There is resistance at the 2,400 level because it is important psychologically and was the all-time high on March 1st. There may be support at the 2,320 level. The SPX rallied off of that level on March 27th and April 17th. There may also be some minor support at the 2,350 level because it was the bottom of the range in early April and the top of the range in mid-April. The popularity of ETFs causes there to be support and resistance at round levels. This is psychological and cannot be explained by traditional fundamental analysis.
Technology - The XLKs broke the uptrend that began in mid-April on Wednesday. If they head lower there will probably be support around the $53.50 level because it was the top of the range in February, March, and April.
Financials - The XLFs found support at the $23 level again. This clearly defined level was support in January, on March 27th, and in the middle of April. If this level breaks to the downside there could be a meaningful selloff. There will probably be support around $22 because there was consolidation around this level in November.
Healthcare Short-term - The XLVs have trended lower since failing at resistance around the $76 level. It isn’t surprising that there is resistance at this level because it was a top last August and then again in March. Longer-term, if they head lower there will probably be support around $72 because it was the top in November and January.
Healthcare Long-term - Longer-term, the XLVs could be forming a multi-year Bearish reversal formation. This is a very important and interesting dynamic. This sector rallied throughout the Obama Presidency. One can argue that this sector profited due to the Affordable Care Act. Now Mr. Trump is trying to repeal Obamacare and this could be why this sector is showing long-term bearish indications. Even Republicans are talking about socializing the Healthcare system now. The $64 level is very important because it was the bottom in September of 2015 and again in February of 2016.
Consumer Staples - The XLPs have been consolidating around $55 for almost four months. If they rally they may run into some resistance around the $56 level again because this is where they hit resistance and rolled over last July. They also hit resistance there on April 26th.
Industrials - The XLIs sold off after failing at resistance around the $67 level. There is resistance at this level because it was the top and an all-time high on March 1st. Longer-term, there is support around $64 because it was resistance in December and January and support in March and April.
Energy - The XLEs have been consolidating around $68 after breaking the short-term downtrend that began in the middle of April. If they head lower there will probably be support around the $64.50 level because it was clearly defined support during last May, June, and August.
Utilities - The XLUs have been consolidating between $51 and $52 since the end of February. The upper end of the range is being tested. It isn’t surprising that there is resistance around $52 because it was the top last July.
Consumer Discretionary - The XLYs spent almost a month consolidating around the $90 level after going parabolic and trading up over +5% in just two weeks. After some profit taking, they are now testing support at the $88 level. This level was the top of the range in March and April.
Materials - The XLBs are consolidating around the $52 level after some profit taking. They traded at an all-time high on April 26th. It is not surprising that they are consolidating around these levels because they were the all-time high in early 2015.