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 been trending higher and trading around all-time highs after finding support around the 2,400 level There was support around the 2,400 level because it was resistance in February, April, and May. The low trade on June 29th was 2,405 and the low trade on July 6th was 2,407. It will probably be support again. Shorter-term, there will probably be support around 2,450 because it was resistance in June. 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 have been trending higher since finding support around the $54.75 level. This level was support in May, June, and early July, and it will most likely be support again if they trade down to there again. They are still in an uptrend, and are testing resistance around the $57.50 level. There is resistance here because it was the highs in early June.
Financials - The XLFs are testing resistance around $25. As expected, this level is resistance because it was the highs in early March. They traded between $23 and $24 from mid-March through mid-June. The $24 level was the broken to the upside, and there was short-term support there last month after some profit-taking. 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 testing resistance around the $81 level. These levels are all-time highs and were the top in mid-June. They are slightly overbought now. Short-term, there will probably be support around $79 because it was the low in late June and early July. Longer-term, if they head lower there will probably be significant support around the $76 level because it was resistance last August, March, and again in early May.
Consumer Staples - The XLPs are consolidating just above support around the $54.50 level after breaking the downtrend that began in mid-June. This level was also support in March, April, and May. If it breaks there could be a large move lower.
Industrials - The XLIs are consolidating near all-time highs 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 Sector - The XLEs are consolidating and continue to test support around the $64.50 level. As expected, there was support at this level because the last four times they traded down to around $64.50, during last May, June, and August of 2016, and then again in early June, a rally followed.
Utilities - The XLUs are rallying off of support around the $51 level. This level is support because it was the bottom of the range from February through May, and was the top last September before a big selloff.
Consumer Discretionary - The XLYs are trending higher after finding support again around the $88 level. This level was support in May and the top in February, March, and April. It will probably continue to be support in the future. They will probably run into resistance around the $92 level because it was the top in early June.
Materials - The XLBs are consolidating just above the $55 level after making an all-time high last week. There is some short-term support around the $55 level because it was the top in June.