Terrible start to the week for equities as the 10-year keeps pushing higher.
Stocks across the board are dropping, volatility is spiking, and the Fear & Greed index is at Extreme Fear.
Long term investors know this is a time to buy and that is exactly what I’m doing in my long-term portfolio.
For those of us that also trade the near term it is important to look across sectors to see what is working, what isn’t, and what sense we might be able to make of the moves.
Most importantly, we are looking for strength.
Weakness is easy to spot. Trendlines have been broken for XLV (healthcare), IWM (small caps), DIA (Dow Jones), XLY (discretionary), and XTN (transports) as shares drop lower.
All of the above are below their respective 150-day simple moving averages as well.
Meanwhile XLU (utilities), XLRE (real estate), and XLP (staples) look even worse. All have sold off steeply.
It is interesting to note that the defensive area of markets are all trading lower.
Taking a look at XLK (technology), SMH (semiconductors), and QQQ there is no doubt sellers have come in but the action is more orderly and flatter.
Effectively, these ETFs are trading sideways.
Growth is trading sideways while defensive sectors are selling off and dropping.
Maybe this is the set up for a Q4 rally. I sure hope so!
Last but not least, XLE (energy) touched it’s 50-day moving average today for the first time since the start of the recent rally in June.
I like the strength this sector is showing and am looking for a bounce back.
Checking in on our shorts. PLUG dropped another 30 cents from 6.83 to 6.53 on Tuesday, aiming for $6.
SOFI dropped 7% already and is below the 150-day simple moving average. Targeting 6.90 next after closing Tuesday at 7.28.
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This service is for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice. These are my opinions and observations only. I am not a financial advisor.
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