Stock-Market-Observations

The investor action synopsis is at the end of this update instead of the beginning.  There is no change.

The weekend update said:

“It would not be unusual to consolidate for a short period after today and that is especially true since the DJ Industrials are entering an area of congestion.”

The market began correcting today after a fast run up last week.  So far the correction has been very shallow and that’s good.  If a shallow correction continues it would mean investors are continuing to buy during this “catching your breath” period.

A follow through to the upside could begin before the close on Wednesday, but at the latest a surge should begin next Monday. Without a follow through to new highs would have bearish implications.

One sector of the stock market that I would like to draw your attention is the discretionary spending of the consumer.  This is represented by the ETF XLY, which consists of companies where the consumer spends his/her money.  Components of the ETF XLY are at the end of this update.  Since over 70% of our GDP is consumer related, the outlook for this group is important to our economy.  Judging by the performance of this sector, a lot of investors think the consumer is going to be spending in the future.

The first chart is a 20 minute bar chart of XLY, which shows how it has soared since it bottomed on June 16.

07-05-11, XLY 20 MIN BARS, SINCE 06-10-11, TREND LINE

The second chart is the daily bar chart of XLY.  It is staying within the trend lines that I have drawn dating back to the correction in July 2010.  It made a new all time high on Thursday July 2 (bullish).  While it was making a new high, the rest of the market hadn’t bettered its May 2nd peak.

The wave count of XLY is very bullish and could portend extensive gains for the market.  We’ll have to see how that turns out but it makes you wonder if this index is leading the market???  We’ll find out later.

07-05-11, XLY DAILY BARS, SINCE OCT 2009, TREND LINES & WAVE COUNT

Discretionary consumer spending represented by XLY could be foreshadowing a revival of the economy during the 3rd quarter of this year. Naturally we will have to wait and see if that’s true but this sector can lead the general market.  The third chart is a weekly bar chart of XLY since July 2006.  XLY peaked the first time in February 2007 and then made a couple of slightly higher highs during the period June 1 to July 7, 2007.  When the general market peaked in October 2007 XLY was well below its July high.  And we all remember what happened after October 2007, don’t we???

07-05-11, XLF WEEKLY BARS SINCE JULY 2006

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• Very Long Term – Since Jan 2000
  
•  Step 2 Of 3 Down Completed, Rally Phase Underway
• Follow Long Term Strategy

• Long Term – Since Mar 2009
  
• Step 2 Of 3 Up Is Ending – Ending Process Is Unconfirmed
  
• Hold – Investors Continue To Hold
  

• Intermediate Term – Since Feb 2011
  
• Correction Completed Since May 2 – Confirmed
• Step 1 Of 3 Down Completed – 2 Additional Steps Are Unconfirmed
• Buy Completed – Short Term Speculator Purchase

• Short Term – Since June 15, 2011
  
• Correction Completed On June 15
• Small Step 2 Up Is Underway
• Buy Completed – Short Term Speculator Purchase

• See Odds ‘N Ends under the category Huh??? on the sidebar.  For an explanation of methodology, see the category Indicators.

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Components of XLY are as follows:

This entry was posted on July 5, 2011 at 3:42 PM and is filed under UPDATE. You can subscribe via RSS 2.0 feed to this post's comments. You can comment below, or link to this permanent URL from your own site.