Análise do DecisionPoint

Energy and Financials Weakest Sectors

by Carl Swenlin

December 11, 2009

EDITOR'S NOTE: We want to welcome our old friend, Tom McClellan, as a new contributor to our Top Advisors Corner section of the website. Tom's Chart In Focus articles will become a regular weekly feature.

On Wednesday two of the sector indexes we track slipped from buy signals to neutral status. All other equity indexes and sectors tracked in our Decision Point Alert Daily Report remain on buy signals, with recent price patterns being similar to that of the S&P 500. The loss of these two buy signals could simply represent a bull market correction in these sectors, or it could be the first sign of broader weakness that could develop into a serious decline. So far the weakness is limited to these two sectors, and there is no reason to think that any serious problems are afoot.

On the contrary, the neutral signals actually alert us to possible buying opportunities in the future. In a bull market we look for corrective action to set up oversold conditions that can be low-risk entry points for new long positions. Neither of these sectors is a buy candidate yet, to say the least; however, when the PMO (Price Momentum Oscillator) and PBI (Percent Buy Index) cross above their moving averages, a new Thrust/Trend Model (T/TM) buy signal will be generated. If you want to be more aggressive, you can act when the PMO turns up or has an upside crossover, but waiting for the signal on the DPA Daily Report is usually best.

Below are charts of the two sectors with their T/TM components. I have also drawn trend lines. Note that Energy is still above its trend line, and the Financials have not made a sharp downside penetration of the trend line as much as they have merely drifted sideways through it.

Gold has begun a correction. Since the recent advance was virtually straight up, the correction could be straight down. For now, let's look for the correction to end when the rising trend line is intercepted -- about 1050.

Bottom Line: We have experienced minor corrections in two sector indexes, but all other equity indexes we track look strong. The S&P 500 is stalled at long-term resistance, but I still think a breakout is possible. Gold is correcting, but I don't think it will be a major correction.

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Technical analysis is a windsock, not a crystal ball. Be prepared to adjust your tactics and strategy if conditions change.