Very Oversold

I’m going to make this post an overview of different markets and sectors. I will then follow it up with a series of emails about key sectors so that you will be able to see the real damage that has been done within the components of the markets.

First, I want to show you are chart that I posted a few weeks ago. It is of the Energy ETF (XLE). I posted about how XLE had a classic reversal pattern and that I would not have been surprised by a bounce. In a bullish market, this bounce would probably have led to new highs, but the fact that the bounce failed into the 200-day (Green Line) shows you how the institutions were using the bounce to sell. This action is the definition of a Bear Market.



I bring this up, because the S&P 500 ($SPX) is very oversold and has the same potential pattern setting up. $SPX actually has two of the same pattern (Blue and Orange triangles), and the pattern low is right on the 38% retracement at 1,008.

I am not telling you that the market has bottomed. I am not telling you to go buy a bunch of anything. I am simply showing you what I see and what I look for. I have to keep looking at what is and making decisions off of what I see. The fact that two Follow Through Days have now failed concerns me greatly.



Here is the hourly S&P 500 futures chart. You can see that it is a downtrend made up of sharp plunges and shallow consolidations. Price seems set to make a sharp move very soon. Will it be up or down? A break of 1,010 would be a significant failure, as it would indicate that the potential bounce lasted all of a few days where most traders were out of town and that the bounce was sold hard. If there is a rally from here, then is it merely an opportunity to short the bounce?



Here are some of the sectors I will be deconstructing today.

Financials (XLF) are holding right on support. Failure from here would not be bullish. This chart looks like a goal line save, but wait until you see how some of the subsectors of Financials look…



Semiconductors have held support four times in recent weeks. Support had better hold or you know the big boys have been selling the bounces. Semiconductors are normally a leading indicator for stocks. It would be very bad it they break critical support.



The 30-year Treasury Yield is on the brink of breaking down. This would be very bullish for Treasury Bonds and give you a clear picture of just how bad things are for the economy.



Crude Oil ($WTIC) has held support and bounced weakly into the 200-day average. If price breaks support, then what does that say for the economy – especially if it happens with a breakdown in some of these other indexes and the 30-day Treasury Yield?