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Update on trade ideas and consumer staples breadth

August 27, 2012

27 August

As I explained one month ago, I will keep the blog ticking over but put more time into the next stage of the project. Some of the ideas posted in previous blogs have not met their entry criteria yet.

They are:

  • iShares Consumer Goods (IYK) v iShares Malaysia (EWM): This was posted as an entry on a Bollinger band breakout, which has yet to occur
  • US Dollar v Japanese Yen: This was posted as a long term moving average crossover and the entry criteria of a break above 80.44 has yet to occur
  • Simon Property Group (SPG) v iShares Real Estate (IYR): This continues to trade sideways

On 16 July, I showed the breadth divergence on the SPDR Consumer Staples (XLP). Here is an update.

The breadth divergence remains in place. XLP has pushed fractionally higher since mid July and the %age of stocks above their 200 day moving average has moved higher to 80% (33 out of 41 stocks). 

Xlp200breadth270812

It is not true that as soon as a divergence exists, price will fall, more that conditions are right for a fall. Breadth divergences mean you should continue to to watch for signs of a reversal. There has been a weekly reversal on XLP, making a new high (although not opening higher) and then finishing down on the week.

Xlp_candles_weekly

This also occurred several other SPDR sector ETFs. This will mean there were a lot of buying climaxes this week and clusters of buying climaxes can accompany tops. Another down week for XLP, particularly if it closes below last week’s low would increase the chance that a top has occurred.

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