I haven’t made a single trade today. The indexes continue to churn up against expected resistance points and I’m not able to find any setups today. We also have the jobs report tomorrow and I’m happy with how my portfolio is setup going into tomorrow. I decided to take a look at the major indexes and noticed some things that I thought were worth sharing.
XLP as one might expect has been slow and steady since the March bottom. In fact, it hasn’t even trade below its 50-day SMA since April. You can’t see it on the 1-year chart, but it is currently sitting on horizontal support with its 50-day SMA nearby. XLP and XLE are the only sector ETFs that I would consider convincingly above their 50-day SMA. So at first glance, it looks like an interesting long idea. However, the big down volume really makes one take notice. I’m not buying this ETF with that kind of selling pressure. I looked at the other ETFs, and I’m not seeing this kind of big down day volume verses up day volume. The one exception is XLU.
XLU also has the big volume spikes on down days. One hypothesis to take away from this is that money has been rotating out of defensive sectors such as XLP and XLU and into riskier sectors.
XLE is technically one of the better ETFs out there. It tested the 50-day SMA three days in a row and bounced higher. Notice that we’re not seeing the big down day volume spikes like we see in XLP and XLU.
Notice the volume on a higher beta ETF such as XME. We see the big down volume spikes, but there is also big up volume spikes. There is a much greater balance than in XLP and XLU.
Another example. XLF doesn’t show any kind of big volume spike on up days or down days.
I don’t think you can make a conclusion off this very simple analysis. However, I do find it curious that not only isn’t money is flowing into more conservative sectors such as XLP and XLU (based solely on volume which is somewhat of an assumption in itself), but that it actually seems to be coming out of these sectors. On these big selloffs, traders seem to be selling their conservative names rather than the higher risk ETFs.
XLE looks particularly interesting when you combine it with the USO chart.
USO has not broken out, but it is trapped by the 300 day SMA after moving above its June-October trading range.
