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Point & Go Figure


What is this? Tic Tac Toe?


While our context is bullish, the timing element is not quite lined up as we remain overbought in the near-term. Collins' Chart Check! illustrates the rotational aspect of the markets here with many charts showing positive breakouts from nice bases, and many others showing failures at resistance.

Scanning through some sector work via ETF's, I see some interesting action. All charts courtesy of Dorsey Wright & Associates:

The iShares Dow Jones U.S. Utilities Sector (IDU) is showing a breakout at 74 recently after a three-month consolidation period between 70 and 74.

The iShares S&P Global Financials Sector (IXG) will potentially deliver its first buy signal since March with a print of 65. Resistance is formidible in the 67 area, but this would be the first positive action for this ETF in three months. On the downside a move to 62 would set up a potential test of the long-term trendline in the upper 50s.

The iShares S&P Global Healthcare (IXJ) is showing a very tentative breakout back in May at 51. The pattern is positive on a point & figure chart (called a bullish catapult - a double top that follows a triple top (.5 x 3 scale). This ETF has been basing for about 15 months now. A print of 48 would change the bullish scenario, however, and suggest that the basing was actually a long-term churn before a key trend reversal.

While retailers continue to find fundamental defenders coming to their rescue, the chart of the Retail HOLDRs Trust (RTH) is bearish on a point & figure basis (1x3 scale). After breaking down in April, the RTH has rallied almost to the upper limits of resistance. Based on that April breakdown, the longer-term downside objective of 72 based on a vertical price count has yet to be achieved.

The Semiconductor HOLDRs Trust (SMH) broke out at on June 2 and have been content to hang around in the area of the break. The support area at 30 has held twice since the first of the year, while the former resistance area at 34 required four tests since November before demand was sufficient to punch through.

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