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ANOTHER LEG LOWER

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The Consumer Discretionary SPDR (XLY) and Finance SPDR (XLF) broke down this week to signal a continuation of downtrends that began in July. In other words, the Aug-Oct rally was just a countertrend advance within a larger downtrend. XLF and XLF moved into bear mode when double tops were confirmed with support breaks in July. Both broke their March lows and forged lower lows. The advance over the last nine weeks retraced around 62% of the Jul-Aug decline and both ETFs met resistance near their 40-week moving averages (red arrows). This week's sharp decline ended this countertrend rally and started another leg down. In addition, a lower high formed and this is what downtrend are all about: lower lows and lower highs. The next support levels are around 30.5 for XLF and 34 for XLY. The Finance sector represents the banks, brokers and REITs. The Consumer Discretionary sector is the most economically sensitive. Needless to say, breakdowns in both bode ill for the market overall.



Chip Anderson
About the author: is the founder and president of StockCharts.com. 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 StockCharts.com 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 StockCharts.com, and provides updates about new features or additions to the site. Learn More
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