Broader markets have been quiet over the last few days and trading in narrow ranges. While the overall trend in the short term has been higher, albeit, with a sideways tone, one cannot help feeling that this market is a bit on the defensive side.
Today, we saw the S&P 500 slip at the close, finishing the day lower by 0.46%, featuring some selling at the close.
As we noted on Monday, the $VIX had been rising, even with the S&P 500 up fractionally. Although the $VIX settled down in yesterday’s session, we can certainly take away that protection was being bought during an otherwise quiet session on Monday.
Looking Back at the past 30 days, here is where the sector strength has been:
Figure 1 – Leading Sectors July 6, 2021 – August 4, 2021, Source stockcharts.com
Health Care certainly makes sense with the vaccine administration and the overall macro news theme that has been featured over the last month surrounding the delta variant.
However, coming in at number two, we see Utilities taking the spotlight, almost up as much as Health Care. Utilities tend to connote highly to a defensive or even overall bearish market stance. Let’s take a look at the XLU (Utilities Sector Fund):
Figure 2 – XLU Utilities Select Sector Fund ETF February 15, 2021 – August 4, 2021, Daily Candles Source stockcharts.com
As you most likely know, utility stocks are high dividend-paying (for the most part), defensive plays when more aggressive growth plays become out of favor. It is concerning for the broader markets when utilities catch such a bid that is in place right now.
In our July 23rd publication, we covered the price divergence in the Dow Jones Transports. The Transports put in a high on May 10th, and they have been falling ever since. This price action is in sharp contrast to the broader market averages making fresh highs.
We were ready when the IYT bounced and traded near the top of its recent downward channel.
Figure 3 – IYT iShares Transportation Average ETF February 1, 2021 – August 4, 2021, Daily Candles Source stockcharts.com
The setup in IYT was a nice one and the day after identification rewarded traders with a gap lower. Our initial short entry zone that was identified was between $257.00 and $259.99. Prices traded in this area on the same day and the next day IYT gapped down. Our current price target is $243.01. This level can change over time, so stay tuned for updates.
Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.
Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!
For a look at all of today’s economic events, check out our economic calendar.
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care
* * * * *
This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.