With the bearish signals in the SP500, I am looking for shorting opportunities within the sectors. XLF recently gapped down and found support at its July low. The lower limit of the gap down is also near its Pre-Covid 2020 high. The July low and gap down lower limit set up a breakout range with a clean stop. If the price closes above the Pre-Covid high, the bearish trend will likely stop in XLF, and upward or sideways price movement will commence. If the price closes below the July low, the bearish move is continuing. This close could also indicate that the gap we saw recently is a measuring gap. A measuring gap is a gap that occurs halfway through a move. The price target associated with a measuring gap would be around the top of a gap from late Nov 2020 that was never filled.
Top 3 Holdings by Weight
Berkshire Hathaway Inc. Class B (BRK.B)
BRK.B is showing mainly bullish signals. We see a clean bounce off the June low on the daily price action. At this writing, the MACD Line looks posed to cross its Signal Line. RSI is pointed up and found support on its average. The TRIX ( a triple-smoothed EMA) is pointed down on the daily and weekly charts, a bearish indication.
JP Morgan Chase & Co. (JPM)
We see hesitation around the bottom of the Nov 2020 gap on the daily price action. The MACD has yet to enter oversold territory. The RSI has entered and left the oversold territory. Comparing the TRIX daily and weekly, we see indications of the bearish move continuing. The daily TRIX is pointed down, while the weekly is flat.
Bank of America Corporation (BAC)
BAC failed to reach the July low during this latest downtrend. This downtrend has brought the breaking of the oversold line on the MACD. The RSI has bounced off its oversold territory and is approaching its avg. We see the TRIX mirroring JPM with a down-pointing daily and flat weekly.
Putting it all Together
I maintain XLF as a potential short opportunity due to the hesitancy I see in the underlying stocks. Where other sectors have already declined and probably exhausted most of their move, XLF still has room to go down. A move down this week, or next week, closing below the July low, is the signal I am waiting for.