Market Update: Defensives Up, Equities Down, and Risk Flatlining

technical analysis, stock analysis, stock picks, stock charting, stock technical analysisBy Andrew Nyquist
Last week I posted a chartology of the Utilities Sector (XLU) projecting a path higher and stating that outperformance by defensive sectors ” is not typically a bullish near term indicator for the equity markets.” In translation: Be Careful.

Well, a little less than a week later we are seeing continued outperformance by defensive sectors such as Utilities, while equities pull back. In the chart below, I have plotted price from the 9/14 S&P 500 highs for the Utilities, Small Caps (IWM), and S&P 500. It is clear that deterioration began last week and followed through this week. Just look at the drop and underperformance of the high beta/risk small caps.

risk off chart, equity underperformance, defensive outperformance

Using the S&P 500 to gauge the broader market, I am seeing initial technical support at 1440, then 1430. But those are the obvious traditional lateral supports. I’m also seeing the potential for an A-B-C measured move to 1420ish (the initial breakout area). A sustained move under 1420 would likely cause technical damage that would need some time to repair.

Sign up for our FREE newsletter
and receive our best trading ideas and research

s&p 500 technical analysis, s&p 500 technical support chart, october 9, 2012

Trade safe, trade disciplined.


Twitter:  @andrewnyquist and @seeitmarket     Facebook:  See It Market

No position in any of the securities mentioned at the time of publication.

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.