September 4, 2018
Except for a very few, the vast majority of sectors and the leading FAANG sector is topping out
Volatility Report Sector’s Table
Context precedes market dynamics, where you see the prevalence of Technical Events #2 on the various investment time horizons, a shift to a forceful trend is likely. Where the TE #3 dominates the current trend while persistent is laboring and expected to change.
Obviously, the sectors that have failed to break out and hold that have True North and RSI/CMB both on a sell should not be owned and where available, long volatility ETF or high delta option trading vehicles for that sector should be put on standby for a short to intermediate term trades.
In our Sector’s Table, only those they are holding their L-T breakouts would be considered for a hold, with both RSI and CMB diverging from the new highs. Such divergence is a sign of market strength, a negative divergence ability to time a reversal is vague at best.
While the bulls are accustomed to rotating asset allocation based on an idea of relative performance, my experience is to use relative strength when the market has short-term or longer declines. As the cliche goes, the cream rises to the top.
So does the new leadership. The table here may provide a few tips regarding where cash may flow during any expected sell-off in September, the Energy and the oil sector should be monitored to see how well they hold up. USO has already tested and held L-T support.
Netflix’s most recent high was not on good buying, TEM reflects panic buying into a peak, which also calls for a COT at least to a sideways range. The daily charts show that the current rally what has thus far failed to make new highs was also on FOMO panic buying. Such emotional buyers will flip in a hurry when prices begin to decline.
Both weekly and monthly charts are on TD Sequential sell signals, all that remains is a move that breaks the head and shoulders neckline that is in the area of I-T support zone, and most recent low 322.00
Oil and Energy Sectors
The bullish sentiment behind the energy complex is at an extreme of 80%, according to a primary source. From a contrary point of view that is not a good foundation for another leg of advance in the near term.
As mentioned previously, a short-term decline that holds support zones and stays inside the horizontal triangle traced out in the right-hand chart would be a set up for the next bull run.
In general, the sectors that have the ability to hold their support zones during the expected decline would be candidates for long trades.
The weekly volatility background supports a forceful I-T trend from here in this group. From a traders point of view, play the breaks, go the way the wind blows.
From a longer-term point of view, it is one of the view groups we like, however, our bias is lower for the next few weeks, so its wait and watch.
I welcome your ideas, comments, and feedback. JFC