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 has essentially traded sideways over the past two weeks. The action over the past week has been very choppy as the trading range became broader. This is usually a Bearish dynamic. If it does head lower there will probably be support around the 2,400 level because it was resistance in February, April, and May. 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 are consolidating after the large selloff that occurred on May 9th. This is the second large selloff in the past month. These are typically bearish dynamics and could mean that the recent rally is coming to an end. Short-term there is resistance around $56. Longer-term, 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 traded between $23 and $24 from mid-March through mid-June. The $24 level was broken to the upside, so now there should be some short-term support there. There will probably be short-term resistance around $25 because it was the highs in early March. Longer-term, there will probably continue to be support around $23 because this clearly defined level was support in January, on March 27th, in the middle of April and in the middle of May. If this level breaks to the downside there could be a meaningful selloff.
Healthcare - The XLVs are trading near all-time highs. They spent the last two weeks consolidating just above the $77 level. There was resistance around this level because it was the all-time high in July and August of 2015. If there is some selling or profit taking, there will probably be more minor support at this level. There should be more significant support around the $76 level because it was resistance last August, March, and again in early May.
Consumer Staples - The XLPs gapped up after breaking resistance at the important $56 level. This level was resistance last July and again in April and should now be a support level. They are now consolidating around all-time highs at the $57 level.
Industrials - The XLIs are trading at an all-time high after breaking resistance around the $67 level on May 25th. This level was resistance because it was an all-time high in early March and the top in late April and most of May. Now it is a support level. Longer-term, there is support around $64 because it was resistance in December and January and support in March and April.
Energy - The XLEs broke their downtrend that began at the end of May and rallied on June 9th after finding support around the $64.50 level. They are now consolidating. As expected there was support around this level because it was support last May through August. It will probably be support once more if they trade down to there again. Todays close was $65.67.
Utilities - The XLUs gapped up almost +4% in two weeks after breaking resistance around the $52 level. This level was the top from February through May as well as last year in June and July. It will now most likely become a support level if they trade lower. They are consolidating now around the $54 level.
Consumer Discretionary - The XLYs are consolidating just above short-term support around the $90 level after making all-time highs earlier this month. As expected, they found support at the $88 level in May. This level was the top of the range in March and April and will probably be support once more if they get there again.
Materials - The XLBs gapped up through resistance around $54 last week. This level was the top in late April. In the short-term, it will probably be support and there will probably be some consolidation now.