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.

While reviewing the 11 S&P 500 sectors and identifying stronger charts in the pile, it’s hard to find a better setup than the Utilities sector. The XLU chart also provides a textbook example of big base breaking on improving relative strength.

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.

“This is a narrowly-led mega cap bull market.”

I can’t tell you how many times I heard myself saying those words at some point over the last couple years. I’ve repeated it so many times that I just assumed it has continued.

A consistent imperfect routine is way better than an inconsistent perfect routine.

When I've worked with investors that are new to technical analysis, I often find that they spend too much time trying to perfect their analytical approach on a particular chart, and way too little time determining which chart they should be looking at in the first place!

I have heard much discussion of volume conditions in recent months, with the S&P 500 achieving all-time highs but accompanied by volume well below average levels. Does this mean the recent breakout in stocks should be suspect?

Yes and no.

The last five months of market history are a blur for me. Back in mid-March, the S&P 500 was in free fall with no end in sight. Here we are in mid-August, and the S&P is retesting all-time highs. Trend-following is about defining the trend, recognizing shifts in the trend and anticipating potential trend changes. So now that the S&P 500 is in a raging uptrend with no apparent end in sight, what would I need to see to turn bearish?