On Friday, I wrote that the S&P 500 is looking like the top is in, and that things could get rough for the bulls. I thought it would be good to look at some of the sector Spyder’s to see if any of them look more top heavy than others:

Energy: XLE

MarketClub Smart Scan Chart Analysis for XLE (affiliate link)

+10 Last Hour Close Above 5 Hour Moving Average
+15 New 3 Day High on Friday
-20 Last Price Below 20 Day Moving Average
-25 New 3 Week Low, Week Ending December 12th
+30 New 3 Month High in October
—————————————————–
+55 Total Score

This chart score indicates a bullish long term and short term trend, with a bearish intermediate term trend. This is our first clue this market is getting top heavy. Let’s take a look at the chart:

The trade triangles indicate traders should be out of this market, starting at 54.88 (current price 55.53). There is all kind of top heavy data to look at on the chart.

At the very high of the market, we see a bearish shooting start followed by an inverted hammer. $60 is going to be a huge point of resistance in this market, so if you’re going short, that’s one place you could put a stop. There is also an intermediate term descending triangle with strong resistance around $56, another stop possibility for the shorts. Price has broken and retested the 50 day EMA. That leaves the long term uptrend line and the 200 day EMA left as the only real support. The long term uptrend line has begun to combine with overhead resistance to form a symmetrical triangle. A break through the long term trend line would signal a major reversal for this market.

There is also volume confirmation for the trend lines and price patterns. Volume is clearly higher on down days, decreased as the descending triangle formed, and spiked upon the breakout.

All of this data supports the red weekly triangle, and forecast that a top has been put in for the energy sector.

Financials: XLF

MarketClub Smart Scan Chart Analysis for SPDR FINANCIAL SECTOR ETF (PACF:XLF) (affiliate link)

Very Weak Downtrend

Smart Scan Chart Analysis shows the current downward trend is at a crossroads and has possibly ended. Look for choppy trading action in the near term.

+10 Last Hour Close Above 5 Hour Moving Average
-15 New 3 Day Low on Wednesday
-20 Last Price Below 20 Day Moving Average
-25 New 3 Week Low, Week Ending December 12th
+30 New 3 Month High in October
—————————————————–
-60 Total Score

The financials are in even worse shape than energy, with bearish short and intermediate term signals. It looks like the financials could be locked in highly volatile sideways trading action. Volatility spreads anyone?

In this chart, the triangles are red on the weekly and daily. $14 is a huge support level for energy in terms of price action, as well as the 200 day EMA. The 50 day EMA has turned bearish already.

Any of the following are bearish signals.

1. Red Monthly Triangle (affiliate link)
2. Conformation of the head and shoulders top pattern
3. price crossing the 200 day EMA
4. 50 / 200 bearish cross would be a clear sign of reversal; it’s possible the could happen at the same time!

Technology: XLK

At first glance, technology appears to be bucking the topping trend. However, close inspection looks like tech may correct and head sideways soon. The last two days of trading have formed a doji, and an bearish engulfing candlestick., both of witch are occurring at previous resistance. There is also a mild divergence on the MACD.

Look for the weekly trade triangle to turn red before exiting long positions. it is possible this market could head to the top of the channel before heading back down.

Other Sector ETFs:
XLV – Healthcare
XLB – Materials
XLY – Consumer Discretionary

Gold
Spot gold has taken a major beating in the past 7 trading sessions, declining from 1226 to 1124. Even though this seems like a massive pullback, it’s still WELL withing the range of a normal correction. The major trend is still positive for gold, and,  I expect gold to continue down until about the $1019 – $1044 level. Momentum still appears to be on the side of gold, so I recommend using pullbacks, or a green weekly triangle as entry timing signals.

Crude Oil

MarketClub Smart Scan Chart Analysis

Weak Downtrend
CRUDE OIL Jan 2010 (E) (NYMEX:CL.F10.E)
Smart Scan Chart Analysis shows that negative longer term is strengthening. The market action could signal the start of a major trend change

-10 Last Hour Close Below 5 hour Moving Average
-15 New 3 Day Low on Sunday
-20 Last Price Below 20 Day Moving Average
-25 New 3 Week Low, Week Ending December 19th
+30 New 3 Month High in October
——————————————————
-70 Total Score

Check out this video on crude, and learn why I think it’s headed lower!

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