Weekly Market Review: May 3, 2009

Volume continues to be low this week. The negative divergence as shown in Figure 1 (right) is staring everyone in the face now. However, we're still within an uptrend channel (Figure 2). And if we were to break up from here on good volume, we'd be forming an inverse head and shoulder. Thus, it's anyone game within this trading range around 840 - 880.

[caption id="attachment_1342" align="aligncenter" width="500" caption="S&P 500 ETF"]S&P 500 ETF[/caption]

[caption id="attachment_1343" align="aligncenter" width="500" caption="S&P 500 ETF"]S&P 500 ETF[/caption]

SMB Capital has a good review of the week.

GICS Sectors Review

From the 6-months chart, we see that Technology (XLK), Telecom (IYZ), and Consumer Discretionary (XLY) are back to their previous level 6 months ago. The resistance is clear as the sectors are now jammed together around that 0% level on the 6-months chart.

From the 1-month chart, we see that the bottom 3 sectors (XLE, IYZ, XLU) ran up in the last week to overtake Healthcare (XLV).

For the 5-day chart, we see an interesting picture. The recent bear rally leader, Financials (XLF), has ended the week at the bottom of the pack and looked weak for the entire week actually. Energy (XLE) looked strong all week and the Telecom (IYZ) made a friday run up to catch up to it too.

Comparing this to last week's market review, this is clearly a money flow rotation between sectors in progress as the previous leader became the bottom fish and the mediocre ones became the leader. This is a sign that we may be breaking out of our trading range soon as the big money are prepping their front row seats.

[caption id="attachment_1338" align="aligncenter" width="500" caption="6 months: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU"]6 months:
XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU[/caption]

[caption id="attachment_1339" align="aligncenter" width="500" caption="1 month: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU"]1 month:
XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU[/caption]

[caption id="attachment_1340" align="aligncenter" width="500" caption="5 days: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU"]5 days: XLE
XLB XLI XLY XLP XLV XLF XLK IYZ XLU[/caption]