Weekly Market Perspectives – 09/21-09/25

Weekly Market Commentary –
 

This week we saw major fireworks in the Builders and Healthcare sectors (as we’ll detail more below) but the overall market indices continued to consolidate in the range highlighted in yellow.

All of the major levels we outlined the past few weeks have held so the following scenario is still in play.

We see 2 possible scenarios of which I believe the 1st scenario is more likely:

1.  If the SPY can hold the ~189 level then the expectation is that we see the market work its way higher.

We now have 2 upside targets in the form of

  • An unfilled gap @ 199.73
  • An unfilled gap @ 196.46 which is an attractive short term target.

With all the bearish sentiment in the media, I still hold that it’s more probable that we see a move back towards to the upside surprising the majority of traders who have taken on bearish positions.

My mid-term target continues to be the unfilled gap way up @ 208.32 which would result in a re-test of the symmetrical triangle.

2.  Else if we break and close below the consolidation pattern to the downside, expect to see the ~189 levels.

If the ~189 level fails to hold then we can expect to find ourselves back at the lows of 182.40 with the following downside targets –

  • Unfilled gap @ 177.48
  • Unfilled gap @ 173.22

 

The VIX remains at elevated levels however numerous downside targets in the form of gaps remain unfilled at 21.97, 17.62, and 16.26.  Again if the VXX breaks down and fills some of the gaps below this would certainly be supportive for a broader market rally.

Keep your eyes on the volatility of the VXX.

  • Note the VXX is sandwiched between the 10 and 50 day MA’s .
  • Note how the ATR on the VXX is showing a downtrending line.

The bullish case for the VXX remains that if the ~189 level on the SPY doesn’t hold, then we have a high probability of testing the unfilled gap @ 33.31.

Here’s an updated VIX (the Volatility index) chart below.

Here’s an update on our sector rotation watch.

Notables –

  • Bio-Tech got creamed this week pulling down the Healthcare sector
  • Healthcare had been one of the leading sectors and now we’re seeing a series of lower lows
  • If you take a look back 3 months, the only sector that has positive returns are the Utilities @ +2.25
  • Contrast that with Healthcare, Energy, and Builders who are down -11.53%, -18.60% and -18.95 respectively in that same period
  • 6 of 11 sectors now appear in a downtrend, so we’re treading a fine line here.  If we start to see the remaining Neutral rated sectors teeter over then this would add more fuel for an overall market selloff

The major sectors are posted here on Finviz for your viewing pleasure –

http://finviz.com/screener.ashx?v=211&ft=4&t=XLF,XLY,XLK,XLB,XLI,XLE,XLU,XLV,XLP

 

Weekly Market Perspectives – 09/21-09/25

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