Caution: 6 Sectors Issuing Sell Signals

Stocks were volatile in the first two days of November, and that trend is likely to continue into this week. Monday may be a quiet day, but the volatility should increase on Tuesday as traders react to the inevitable leaks related to exit polls on the Presidential election. Wednesday should set the tone for the short-term trend.

Stock Market Breadth Turns Bearish

There are a number of ways to look at market breadth. All of them try to identify the underlying strength or weakness of the majority of stocks in the market. The weekly charts below show nine SPDR sector ETFs, and all of them appear to be forming topping patterns.


They are (from left to right):
1. Consumer Staples Select Sector SPDR (NYSE: XLP)
2. Health Care Select Sector SPDR (NYSE: XLV)
3. Technology Select Sector SPDR (NYSE: XLK)
4. Energy Select Sector SPDR (NYSE: XLE)
5. Utilities Select Sector SPDR (NYSE: XLU)
6. Consumer Discretionary Select Sector SPDR (NYSE: XLY)
7. Materials Select Sector SPDR (NYSE: XLB)
8. Industrial Select Sector SPDR (NYSE: XLI)
9. Financial Select Sector SPDR (NYSE: XLF)

The daily view reinforces the bearish outlook. Six of the nine are on sell signals based on their 50-day moving averages: XLP (1), XLK (3), XLE (4), XLU (5), XLY (6) and XLB (7). XLI (8) is near a sell.
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