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All things considered, the consumer discretionary sector ETF, pictured above, is sporting an orderly pullback on its weekly timeframe since the September highs. We have yet to see the loose and sloppy weekly chart patterns here that we would at traditional major bull market tops. Moreover, all weekly chart moving averages are rising and lined up properly, giving the presumption of a bull market correction in lieu of the start of a fresh bear. That is not to say that buying back in September and adding the whole way down would have done your portfolio any favors, but the goal here is to interpret the actual price action here objectively.
Depending on how Friday’s half-day of trading goes, the XLY is likely going to finish this week out with an impressive candle, threatening a weekly breakout from the falling channel outlined above. Indeed, a weekly close back above $47 is the first step bulls are looking to take to advance the notion that the correction is over.
Losing $44.66 (last week’s low) on a weekly closing basis would start to cast doubts on this bull thesis. However, losing your head about amorphous, concocted fears such as the Fiscal Cliff or parsing the language of European bureaucrats does not amount to much in the way of a trading thesis. The key to this market, as always, as we sort out the “sell into the rally” versus the durable bottom standoff is cutting losses and sticking with your trading discipline. Nonetheless, it should not be lost on a longer-term timeframe that the March 2009 bull almost assuredly will not meet this sudden and easy of a death onto which bears can pounce. In other words, act like a professional and stop panicking with each new reason to worry endlessly pushed by the financial news media.
Also be sure to keep an eye on the following major components of the consumer discretionary ETF, uptrends still intact on their respective weekly and monthly timeframes.
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Good points on the Consumer Discretionary sector. But of interest, the XLY has been outperforming the overall SPY since the middle of October (chart link follows). I circled in blue where the XLY started to show outperformance:
http://stockcharts.com/h-sc/ui?s=XLY&p=W&yr=1&mn=0&dy=0&id=p01769429856&a=283876005
Keeping my Hedge
$TZA