S&P 500 SECTOR SPDRS PREVIEW - SPY XLK XLF XLV XLY XLI XLP XLE XLB XLU
In financial markets, there are certain price levels that are more significant than others with regards to the amount of supply and demand that exists at them.
In financial markets, prices are always doing one of three things. They are either going up, going down, or staying the same.
BHT utilizes a process and methodology that has been developed over twenty years in order to identify these levels and price trends.
BHT does not utilize many of the traditional Technical Analysis Techniques such as Gann Theory, Harmonic Patterns, or Elliot Waves.
BHT questions and doubts the validity of many of these techniques and believes they are in the realm of Bigfoot and UFOs.
BHT utilizes Technical Analysis to identify meaningful trends and important supply and demand levels in the financial markets. The following are important dynamics to consider in the S&P 500 Economic Sector SPDRs:
S&P 500 – The action over the past few weeks is a great example of the supply and demand dynamics that we study. When markets get to important support or resistance levels when they are oversold or overbought, they tend to reverse their trends. When markets get to important support or resistance levels and consolidate and become not oversold or overbought, the levels tend to break. That is what happened with the $260 support level for the SPYs. The prior times they reached this level earlier this year they were oversold and rebounded. During this most recent time, they spend time consolidating and lost their oversold dynamic. They subsequently broke the level.
S&P 500 Long-term – The SPYs are oversold and testing important support around the $240 level. This level was the top in the first half of 2017 and support in the second half. From a weekly perspective, this is the most oversold that they have been since 2011.
Technology – The XLKs are very oversold and have had very large trading volume. If they rally there should be resistance around the $63.50 level because this is where the recent lows were in February, April, and November.
Financials – The XLFs are very oversold and trading around the same levels that were the lows in the first half of 2017. They will probably rally over the next few weeks. Longer-term, it is easy to see the importance of the $25 level. There should be significant resistance there.
Healthcare – The XLVs are oversold and testing support around the $82.50 level. There is support at this level because it is where the lows were in May and June. They will probably rally. There may be resistance around the $85.50 level because it was resistance in February an March and support in July.
Consumer Discretionary – The XLYs are oversold and trading near levels that were resistance in 2017. These levels will probably provide support. If they rally there will probably be resistance around the $98.50 level. This level was important support over the past year so it will now probably be resistance.
Industrials – The XLIs are oversold and trading around the $62 level. This is an important level because it is where the post-election rally began in late 2016. There should be support here.
Consumer Staples – The XLPs are oversold and testing the very important $50 level. This level was the low in 2016, and the top of the range throughout 2015. It was also the top of the range during this past May. There will probably be a rally here, and this is one of the main dynamics that should drive the SPYs and broader markets higher. If they do rebound and there will probably be resistance around $52 because it is where the recent lows were in October.
Consumer Staples Long-term – The XLPs are oversold and testing the very important $50 level. This level was the low in 2016, and the top of the range throughout 2015. It was also the top of the range during this past May. There will probably be a rally here, and this is one of the main dynamics that should drive the SPYs and broader markets higher.
Energy – The XLEs are extremely oversold and have been trading with levels of volume that could signal capitulation. They are also near the levels that were the lows in early 2016. A possible trading strategy would be to go long once the downtrend line is broken.
Energy Long-term – The XLEs are trading near levels that were the lows in early 2016.
Utilities – The XLUs have broken their recent uptrend and are trending lower. There will probably be support around the $52 level because it was resistance last April and support in July and August.
Materials – The XLBs are oversold and trading with levels of volume that could indicate capitulation. There is no clearly defined support or resistance around current levels.