One of my favoite activities is analyzing sector strength relative to the overall market, or Intermarket Analysis as John Murphy would say. When I came across the concept, my eyes were really opened to another tool to really dig into the price action.

Today I wanted to share a few charts I am looking at this weekend. It’s great to stare at the levels in the S&P all day (not), but I firmly believe in understanding what is going on under the hood as the biggest capitalization names in the S&P can hide a lot.

Here they are:

XLY/XLP broke channel support back in February and has been flirting above/below but has stayed under since. I want to see this back above support if we are looking for a new bull market.

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XLK/SPY this is just gorgeous. A 15 year base breaking out and also reaching overbought in a very important sector. This gets me excited. I absoulutely love trades with clear support/resistance and monster bases. I am currently long this spread.

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XLI/SPY, a very important component to market health and market uptrend. I want to see this consolidation resolve to the upside.

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XLB/SPY a break in the downtrend would be a positive. There are definitely a few stocks within this ETF that are setting up nicely.

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XLE/SPY might be bottoming in my opinion. I am coming across many energy stocks that look like they will produce some alpha in the near future. Also taking a look at the CRB Index (which is Oil heavy), it seems to be putting in a Inverse Head & Shoulders bottom.

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XLF/SPY was one of the worst sectors to be in this past bull run, but it is coming to the apex of this consolidation. A breakout here would be a huge positive for the market. Probably not a sector I would be looking to overweight though.

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XLV/SPY has been lagging for a while now, even though we are starting to see strength out of Biotech. I don’t want to see this support give. I do like that it is still in a bullish range, handling the correction nicely.

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XLY/SPY on its own is an important one as the biggest outperform out of the 2009 bottom. It does look at risk here to me. It is not oversold, but I am watching if the divergence gets taken out. The trendline has. Will be watching how this acts for further evidence. Underperformance from names like SBUX and NKE lately show why looking at this chart.

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XRT/SPY, a component of Discretionaries if you will, looks like it has formed a top. Not sure this classifies as a H&S, maybe more of a double top, but either way who cares. It broke support and restested, which proved as new resistance with momenutm in a bearish range. Very clean. This is heading lower.

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ITB/SPY, also part of Discretionaries, looks the healthiest. Momenutm is in a bullish range and I expect this ratio to break out as we are near the apex. If it doesn’t its a sign of more weakness to come in this sector, and XLY as HD & LOW are components.

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Thats all for now. I like my money in the best performing sectors, how about you?