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 lower since making all-time highs around 2,490. There is short-term support around the 2,450 level because it was resistance in mid-June. If this level breaks, longer-term there should be support around 2,400 because it was resistance in February, April, and May. It was also the lows in early July. 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 consolidating around the $58 level after making all-time highs and becoming overbought recently. There is resistance here because it was the highs in early June.
Financials - The XLFs have been consolidating and may be breaking support and rolling over around the $25 level. There is resistance around these levels because they were the top in March. Longer-term, there will probably continue to be important 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 have broken their recent downtrend and are consolidating after finding support around the $78.50 level again. There was also support at this level in early July. There was resistance around the $81 level in June and late 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 rallied after finding support once again around the $54.50 level. This level was also support in March, April, and May. Now they are testing short-term resistance around $55.90. This level was also resistance at the end of July.
Industrials - The XLIs are consolidating just under all-time highs. They broke 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 will probably be a support level if they trade lower. 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 broken important support around the $64.50 level. 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. It should now become a resistance level. More precisely, $64 was the low in June and July. They are oversold now.
Utilities - The XLUs rallied off of support around the $51 level in early July. 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. Now they are still trending higher, and testing resistance around the $54.50 level. This level was the top in early June.
Consumer Discretionary - The XLYs are consolidating around $90. They trended lower after hitting resistance around the $92 level. As expected, there was resistance at this level because it was the top in early June. There is support around the $88 level because it was the top of the range in March and April.
Materials - The XLBs trended lower after making an all-time high on July 25th. They broke their downtrend after finding support around the $54.50 level. This level was also support throughout the month of June. It will probably be a support level again if they trade back down to there.