The Health Care Select Sector SPDR Fund appears extremely overbought and ready for downward correction based on the QuantCycles Oscillator, reports John Rawlins.
Last week’s sharp equity rally pushed many sectors into overbought territory. The QuantCycles Oscillator indicated a top in the Health Care Select Sector SPDR Fund (XLV) on its daily chart at the beginning of June. Last week’s rally pushed it into extreme overbought territory with the market expected to decline over the next two weeks (see chart).
While not as extremely overbought, the long-term weekly oscillator turned bearish at the same time and is indicating a five-week downtrend (see chart). This confirmation creates a stronger short signal.
The overall downtrend is confirmed on the shorter-term four-hour oscillator (see chart below). This confirms a strong short signal in XLV.
John Rawlins described the value of the QuantCycles Oscillator recently at The Orlando MoneyShow.
The QuantCycles indicator is a technical tool that employs proprietary statistical techniques and complex algorithms to filter multiple cycles from historical data, combines them to obtain cyclical information from price data and then gives a graphical representation of their predictive behavior (center line forecast). Other proprietary frequency techniques are then employed to obtain the cycles embedded in the prices. The upper and lower bands of the oscillator represent a two-standard deviation move from the predictive price band and are indicative of extreme overbought/oversold conditions.
