Last week I posted a chartology
of the Utilities Sector
(NYSEARCA:XLU) projecting a path higher and stating that outperformance by defensive sectors ” is not typically a bullish near term indicator for the equity markets.” In translation: Be careful.
Well, a little less than a week later we are seeing continued outperformance by defensive sectors such as utilities, while equities pull back. In the chart below, I have plotted price from the 9/14 S&P 500
(INDEXSP:.INX) highs for the utilities, small caps (NYSEARCA:IWM), and S&P 500. It is clear that deterioration began last week and followed through this week. Just look at the drop and underperformance of the high beta/risk small caps.
Using the S&P 500 to gauge the broader market, I am seeing initial technical support at 1440, then 1430. But those are the obvious traditional lateral supports. I’m also seeing the potential for an A-B-C measured move to 1420ish (the initial breakout area). A sustained move under 1420 would likely cause technical damage that would need some time to repair.
Trade safe, trade disciplined.
Editor's Note: Andrew Nyquist is an independent investor based in the Minneapolis area. This article originally appeared on his investing and economics site, See It Market.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.