The Finance SPDR (XLF) and Consumer Discretionary SPDR (XLY) formed large double tops this year, and both broke support in late July to confirm these bearish reversal patterns. Volatile trading ranges followed these support breaks (yellow ovals), but these ranges look like consolidations after a sharp decline. In other words, XLY and XLF became oversold in mid August, and these consolidations worked off these oversold conditions. Friday's sharp decline looks like the start of another move lower, and a move to the next support area is expected.

Both sectors are important to the overall market. The Finance sector represents banks, brokers and REITs. It is the single biggest sector in the S&P 500. Moreover, banks and brokers are at the heart of the sub-prime problems, and this issue is not going away until the Finance sector rebounds. The Consumer Discretionary sector consists of retailers, restaurants, media companies and automakers. It is the most economically sensitive sector, and a breakdown in XLY bodes ill for the economy overall.

Chip Anderson
About the author: is the founder and president of He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at, and provides updates about new features or additions to the site. Learn More
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