Click to Enlarge
While Tuesday’s selling did cause some concern, it was quite normal from a technical standpoint. Both the Consumer Staples (XLP) and Consumer Discretionary (XLY) ETFs are in well-established uptrends. XLP appears to have just completed its continuation pattern as it closed above its downtrend, giving upside targets in the $28.20-$29 area. Meanwhile, XLY has just pulled back to the prior breakout level with next resistance in the $33.50-$34 area. Volume has been declining, which is a concern, but the rising 50- and 200-day MAs tell us that the dominant trend is positive.
