What we are listing here are all the things that could pop up to derail the equity markets' rally. However there is a common maxim on Wall Street that its not the known concerns that are the issue (theoretically the market has factored in these events and their likelihood), rather its the unknown unknowns that are the real problem. But for now we seem to be dancing that line of buyable dip or significant corrective action. Since we have now ended another month we will take a look at multiple time-frames, from long to short, to try to discern what all this nervous talk actually means for our investments.
We will start with the shorter, Daily view and move through the Weekly and Monthly views as well.
SPX Daily 1-Year (Bearish)
Last week we retested the prior support zone we were watching so closely and that proved to follow suit and hold as new resistance. The market will need to take that level out to the upside if this short term view is going to turn around. We seem to have found some support at the new uptrend support line from the November low and the June low. However we also see a down sloping 20 DMA that too will act as resistance on the way back up. The first thing we want to see accomplished here will be for the support line and last weeks' low to hold. Then we will need to see the resistance near 1,670 taken back. If this low fails to hold, the last line of defense will be the June lows.
SPX Weekly 3-years (Neutral)
SPX Monthly 15-years (Bullish)
The bottom line is that while there are signals that the market may correct significantly from these levels, it is still to be seen that the longer term support we are watching will fail to hold. As of right now the market is at a critical juncture on multiple time frames, it is still holding above key support levels for now, but is showing some signs that it may be looking to correct or consolidate for a longer period of time. There are a lot of things to fear right now in the market but until price confirms that fear on the longer term time frame, we are still in a position of strength with the current uptrend.
On that note, we only lost one of our holdings this week, but it was a big one. The Financial sector group (XLF) failed to hold its key support levels last week and is a major crack in the markets armor. Maybe it will be a false breakdown and it will rally right back, but as of now the risk/reward is no longer favorable.
XLY, XLK, XLI, XLE, XLV
HAIN, DDD, CMI, AAPL, F, PBW, WFC, PPG
XLF, XLB, XLP, XLU
We had two notable winners this week with DDD and HAIN showing excellent relative strength. Several of our holdings are still breaking out against the market on a relative basis and seem to be holding up better than the overall market also.
Our other holdings that have shown good relative strength recently are: