This morning I quickly went through the strongest sectors (trading above 20 DMA) and the weakest sectors (trading near or below their 200 DMA).
Strong: IAT, IBB
Weak: FXI, PGJ, IAI (below 200 DMA), GDX (trading at 200 DMA) XLE, XLK, SMH, XLB, XLU, XME
Most traders are trying to make a judgment right now whether the recent weakness is a pullback (and a buying opportunity) or the start of a bigger move down. Put another way, will we see SPY firm up here or will we see it test the 200 DMA (about 8% lower from here)?
Besides being deeply focused on China, I’m watching several of the weak ETFs mentioned above. If the market is going to find support, I would expect to see the indexes trading near their 200 DMA to firm up. If these weaker indexes drive through the 200 DMA and China continues to be weak, it makes it highly likely that the major indexes such as SPY will test their 200 DMA as well.
With respect to the indexes trading below their 200 DMA, I’m watching to see if the dip below the 200 DMA is just a “stop overrun” or something more. Will indexes such as IAI, FXI and GDX trade up through their 200 DMA or will the 200 DMA become resistance?
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rosocecasita
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chartsandcoffee
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T. Waffle
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chartsandcoffee
