Relative strength is one of the most important parts of my technical toolkit. Basically, the idea is to lean into stocks that are working and lean away from stocks that are not working.

Here we’ll review how a bearish momentum divergence signals a potential trend exhaustion, and how to validate and confirm these signals using traditional support and resistance levels.

Ratio analysis is a critical piece in my macro technical approach, as it helps to differentiate different sectors, styles, regions, and themes by gauging their relative performance to one another.

As I paged through the S&P 500 charts during my normal weekend review, I started to identify some consistent patterns in the leadership sectors of Consumer Discretionary and Technology. Today I’ll share with you how I bucket these charts by their patterns, and why the Consumer Discretionary Sector SPDR (XLY) is likely the most important chart to watch.