Below is a one-year trading range chart for the S&P 500. The light blue shading represents the index’s normal range, which is one standard deviation above and below the 50-day moving average (white line). Because of the sideways action we saw throughout the summer, the S&P’s range is very relatively tight right now. It doesn’t take a big move to send the index into extreme overbought or oversold territory. As of this morning, the index is actually still slightly oversold, but thus far it hasn’t broken any major technical support levels.
Below is a look at our trading range charts for the ten S&P 500 sectors. Both Consumer Staples and Consumer Discretionary are trading more than two standard deviations below their 50-day moving averages. Both sectors have yet to totally break down, though, and the Consumer Discretionary sector’s uptrend is still intact; both look due for a bounce here. The Energy sector has pulled back to the bottom of the sideways range it has been in since April. Look for it to hold support here. The Financial sector is back above its 50-day moving average and holding up better than a lot of other sectors at the moment. If it weren’t for company-specific issues at Wells Fargo (WFC) recently, the sector would be doing even better.
Health Care and Industrials are both sitting at the bottom of 9-month uptrend channels right now. If they can hold support here and post a day or two of gains, they should trend back towards the top of the channel in the coming weeks. The Materials sector is in a similar pattern as well.
Technology has been a major standout over the last few weeks. As the rest of the market has traded into oversold territory, Technology is at the top of its trading range and looking to make new highs. Finally, both Telecom and Utilities have formed new short-term downtrend channels after breaking through the bottom of their uptrend channels in late August. Both have thus far managed to hold above their May lows, but if those levels break, technicians will be looking for additional declines.