While we have negative long-term expectations for the market, we notice that most of the eleven S&P sectors are looking rather bullish intermediate-term. Only two sectors — Energy and Materials — have been making new lows, but the rest are either showing rising bottoms from the June low or are making a double bottom against that low.
In the Diamond Mine trading room, which Erin holds for subscribers of the DP Diamonds Report on Fridays at Noon ET, she “mines” to find the “Sector to Watch” and “Industry Group to Watch”. She noted that aggressive sectors were showing bullish price patterns, while defensive sectors (XLP, XLU and XLRE) were displaying fading strength. Here is an excerpt from Erin’s Diamonds Report today.
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In this morning’s Diamond Mine Trading Room, I liked XLY as a “Sector to Watch.” After getting participation data for the day, I still believe XLY is the most bullish. As far as “Industry Group to Watch,” I also haven’t changed my mind. Specialized Consumer Services is outperforming in a big way, and today’s rally suggests more upside ahead.
Sector to Watch: Consumer Discretionary (XLY)
I decided to go with XLY, but XLC and XLK were close seconds. My reasoning for this one over those was that we have better participation of stocks above their 50-day EMAs, and the SCI reading was higher than the others and rising steadily. We have a bullish ascending triangle, which implies a breakout above the confirmation line and 50-day EMA.
Industry Group to Watch: Specialized Consumer Services ($DJUSCS)
There were some interesting groups out there within XLY, but this chart floated to top. The RSI is positive, rising and not overbought. The PMO just accelerated above the zero line. Stochastics have tipped up. Not only is there an intermediate-term bullish double-bottom, but price is traveling in a rising trend channel.
Good Luck & Good Trading!
Erin Swenlin & Carl Swenlin
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Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin
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