Sector Update – Breather for the US Market?

The sector analysis remains one of the best starting points in determining where an individual can look to put their money to work. Here is an update on the key levels given the large amount of volatility we encountered over the past month.

Sector table jan 31

Consumer Staples

The consumer staples sector continues to be one of the strongest among its peers as we have been mentioning for some time now. The monthly timeframe continues to show its strength with the intra-month volatility holding the multiple timeframe support level we outlined at 47.52. The sector attempted retest of the all-time highs while its peers were struggling to hold major support levels. The daily sentiment remains bullish closing above the cloud on the last trading day of the month. A sustained breakout above these highs could signal a long term bullish play with all the timeframes in sync at that point.

XLP monthly jan 31 XLP weekly jan 31 XLP daily jan 31

Utilities

The utilities sector attempted a retest of the consolidation high it has been swinging in however yet to close above it. With the daily and weekly sentiment being bullish, a sustained break out above the 45.55 level will be the key level to watch for if this sector is going to attempt a retest of its January 2015 highs.

XLU monthly jan 31 XLU weekly jan 31 XLU daily jan 31

Technology

The technology sector seems to have regained some strength given that the intra-month volatility it experienced and still held the major support indicating its bullish trend remains intact. The 37.98 support highlighted is the key boundary conditions for this sector. The weekly sentiment is neutral however if price consolidates around here for another month, this sector may have a chance to change that. 41.34 is the key resistance this would need to concur prior to looking for any bullish opportunities. The daily understandably started a bearish trend however halted that and may begin to setup a major pullback to the cloud to align with the monthly and weekly timeframes over the next little bit.

XLK monthly jan 31 XLK weekly jan 31 XLK daily jan 31

Consumer Discretionary

XLY held the monthly supports on the close despite going through intra-month volatility where price spiked below the levels. However, this caused the weekly to enter into the cloud causing a change in the sentiment to neutral. The daily timeframe initiated a bearish trend but the higher timeframes are not in sync so this may be short lived. 75.42 is a key resistance on the daily and weekly to watch for how price action behaves.

XLY monthly jan 31 XLY weekly jan 31 XLY daily jan 31

Healthcare

The monthly timeframe held the support of the long term bullish trend despite going below it during the month. With the change in the weekly sentiment now being bearish, this sector may be setting up for a retest of that monthly support and may even close below it over the next little bit. The key resistance level to watch for is 69.01 and price must hold here to allow a retest of that monthly support. The daily timeframe started a bearish trend and is showing signs of beginning to push to higher timeframes to support levels.

XLV monthly jan 31 XLV weekly jan 31 XLV daily jan 31

 

Financials

The Financials sector was unable to hold the long term support of 22.07 closing below it as it could not recover in time. This marks an increase in the probability for a major pullback to occur. The weekly timeframe also had its sentiment change to bearish while closing below the multiple timeframe level consistently. The daily timeframe began a bearish trend and continues to show its strength. We expect a short term pullback to that same multiple timeframe level price had initially broke and watch for it to become the new resistance to hold.

XLF monthly jan 31 XLF weekly jan 31 XLF daily jan 31

 

Industrials

The industrials sector had ran out of steam of its short term bullish move on our last sector update and finally closed below the long term support on the monthly timeframe. This now has a high probability for a major pullback to occur to the cloud. The weekly timeframe is also setup for a bearish trend aligning itself with the monthly. The daily timeframe was able to change its sentiment back to bearish and now sync with the higher timeframes. Watch for a break below the 48 level for this sector to commence its major pullback over the next little bit.

XLI monthly jan 31 XLI weekly jan 31 XLI daily jan 31

Telecom

The telecom sector attempted a retest for its consolidation lows as we had projected in the last update however was unable to close below it. Watch for the daily timeframe to provide hints on whether price action will attempt to break this consolidation low or begin to swing back.

XTL weekly jan 31 XTL daily jan 31

Materials

The materials sector reached our long term target support of 40 as we had projected over the past few months. The daily and weekly timeframes will be the ones to watch for now to project whether this sector will attempt to hold here or further break down. Should you have been playing individual names within this sector, they should all be in the green with you beginning to protect those very same profits.

XLB monthly jan 31 XLB weekly jan 31 XLB daily jan 31

 

Energy

The energy sector also reached the lows of 2010 as we had projected in our last sector update. Similar to the materials sector, all the bearish plays in this sector should have been well into profits during that retest over the past month. With the daily timeframe back at the level it had broke prior to the 2010 low retest, watch for price action to tell us what it will decide to do. The short term support of 53 is the key level to watch for should this sector attempt to break some of those 5 year old lows.

XLE monthly jan 31 XLE weekly jan 31 XLE daily jan 31

If you would like to learn how to trade like an institutional trader or learn more about our multi-timeframe email alerts, go to www.ichimokutrade.com or email us at info@eiicapital.com

EDUCATIONAL USE: Commodity Futures Trading Commission, Forex, Futures, Equity and Options Trading has large potential rewards, but also has large potential risk and may not be suitable for everyone. You must be aware of the risks and be willing to accept them in order to invest in these markets. Do not trade with money you cannot afford to lose. This is neither a solicitation nor an offer to Buy/Sell. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this document. The past performance of any trading system or methodology is not necessarily indicative of future results. All information provided on the Blog is for educational purpose.

 

 

About the Author Pranav