The only two sectors to close higher on Wednesday were in the defensive category, Consumer Staples (XLP) and Utilities (XLU).
We have already been watching XLP as it has established a short-term rising trend. What we aren’t seeing is healthy participation…yet. We are seeing some expansion in stocks above their 20/50-day EMAs, but the Silver Cross Index is stagnant and below its signal line. Still, we do see this as one bright spot to consider in the current market environment if you want to be long.
XLU is experiencing a fresh bounce after losing ground out of the October top. In contrast, we have healthier participation as far as %Stocks > 20EMA. Yet, the Silver Cross Index hasn’t budged. This new rally did put price back above the 20-day EMA and we see a PMO Surge above the signal line (bottom above the signal line). We like XLU’s chances of continuing its current rally.
Conclusion: When defensive sectors lead the market it is bearish overall or could get worse. Seeing these two sectors as bullish should give us pause.
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Erin Swenlin is a co-founder of the DecisionPoint.com website along with her father, Carl Swenlin. She launched the DecisionPoint daily blog in 2009 alongside Carl and now serves as a consulting technical analyst and blog contributor at StockCharts.com. Erin is an active Member of the CMT Association. She holds a Master’s degree in Information Resource Management from the Air Force Institute of Technology as well as a Bachelor’s degree in Mathematics from the University of Southern California.
