Further to my last weekly market update, this week's update will look at the Major Indices and Major Sectors to assess strength vs. weakness in these groups during the past week.
The Weekly chartgrid below of the YM, ES, NQ and TF shows that price has been locked in a tight upward-sloping trading range from their June lows, with market action see-sawing back and forth each week.
This is the first week since that time that all four E-mini Futures Indices have closed above the mid-Bollinger Band (for today's exercise, I'll refer to this point as their "mean" on the Weekly timeframe). All four closed near their weekly high.
The Weekly chartgrid below of the nine Major Sectors shows the same weekly roller-coaster action…XLY (Consumer Discretionary), XLK (Technology), XLI (Industrials), XLB (Materials), XLE (Energy), XLP (Consumer Staples), XLV (Health Care), XLU (Utilities), and XLF (Financials).
Seven of the nine Sectors closed above the mid-Bollinger Band ("mean") (four of them for the first time since their June lows — XLY, XLK, XLI and XLE)…the two exceptions are XLB and XLF, which closed just below. All of them closed near their weekly high.
The 4-Hour chartgrid below of the YM, ES, NQ and TF shows a close-up of this trading range. You can see that price bounced off the lower end of the range, which happens to coincide with a 50/50% Fibonacci fanline bisecting confluence level (horizontal broken blue line) on the YM and ES, while the bottom of the range is below this level on the NQ and TF.
Further to my post of July 19th, the Daily chart shown below depicts action of the SPX:VIX ratio pair from the beginning of this year. In that post, I had mentioned that if the SPX was to move higher, it would have to remain above a potential Inverse Head & Shoulders neckline at 82.50ish.
After this week's wild gapping move to the downside, followed by two successive gaps to the upside, price closed just above this level at 82.99. With any more moves below this neckline, the argument for a further and sustainable move to the upside becomes weakened and will cause me to re-think that this is not a valid IH&S formation, particularly since a lower swing low (and lower right shoulder) has now formed on this timeframe.
In summary, lest the markets fall prey to continued whippy, non-trending, roller-coaster action next week, and to convince us that a sustainable move upward has, in fact, begun in earnest (and not based on rumours and innuendos), it is important that the four E-mini Futures Indices, the nine Major Sectors, and the SPX:VIX ratio pair continue to move upward from Friday's close.
Headwinds which may present problems for the U.S. markets are outlined in my posts of July 20th, July 19th, and July 17th and will need to be overcome in the process. We have interest rate decisions forthcoming from the FOMC on Wednesday, and the BOE and ECB on Thursday, as well as the U.S. Unemployment Rate release on Friday.
Buckle up…it's bound to be an interesting ride!
Enjoy your weekend and good luck next week!