OVERBOUGHT SECTORS
As we start the week, 4 SPX sub-sectors are overbought, according to a Bollinger Band Analysis (above upper bound on a 50-day SMA, 2 Standard Deviation).
Three of these sub-sectors remain in a bullish uptrend, yet overbought. They are TECHNOLOGY,ENERGY,MATERIALS (gee, what a surprise!). CONSUMER DISCRETIONARY sub-sector is overbought as well, but the uptrend has just started and is not accompanied by a wide BOLLINGER WIDTH, (an indication of a prolonged uptrend that has reached excessive short-term levels).
Bullish sentiment seems almost unanimous in the extended sectors. Avoiding a rush to enter at these levels seems prudent as the SPX enters its next resistance zone of SPX 1440-1460. The SPX 1380-1400 level held up well as support.
I have maintained that a neutral to bullish stance could be expected through the summer before further earnings based concerns hit the market. I stick with that scenario.
Look for quick, sharp pullbacks in the market leaders for better entry points. Buying at current overbought levels in the hot sectors warrant such concern.
For reference, current sub-sector prices using the SPX SPDR as proxy,
XLB $46.38
XLE $89.33
XLK $25.60
3 years ago • Notes