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The State of the Markets

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Cyclical sectors are pointing to higher prices ahead.

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It appears that we are back into my early cyclicals leading the markets theme.  I haven't posted about this recently as we saw the late cyclicals lead early in the year, so that is where I was focused.  This is an odd rotation, but one that allows for bullish continuation for quite a while.  Let's look at each of the three and see how they shape up.

Transports (ETF: XTN) - Coming alive a bit today, but has failed to make a higher high since before the July/August swoon.  This area should make a new high fairly soon, probably in about 2 weeks or so.



Financials (ETF: XLF) - Leading like mad after the swoon.  Looks great, broke to new highs and is holding those highs nicely for sideways consolidation and basing.



And as a subset of XLF, look at the banks specifically.  Regional Banks (ETF: KBE) - Banks look to be setting up for a great setup with a cup and handle forming, allowing for a nice extension higher.



Retail (ETF: XRT) - Leading to new highs, a nice cup and handle again.  Additionally we see that it has effectively reset the bar for positive momentum with a 50/200 day moving average positive cross.



All of these (surprising to me) are showing we should have more continuation higher soon in the broader indexes after a bit more rest.   So I am positioned accordingly.  I am currently about 90% long with a beta of around 1.1.  I am actively researching and looking for good setups of laggards in these three sectors to allow for short term alpha "bursts" to be added to the portfolio.  These would be 3-4 week setups like the ZION setup I buzzed earlier. [subcription required]

Twitter: @twistedmarkets
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