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!

My broad market analytical approach is comprised of three main steps: Price, Breadth and Sentiment.

First off is price. If you ask me what chart I would look at to get a read on the S&P 500 index, my answer would be a chart of the price of the S&P 500 index! Price is king.

One of the key investment themes of 2020 has been the rotation from a stronger US Dollar environment to a weaker dollar through mid-September. However, signs are emerging that the downtrend in the greenback may be nearing its end, which will have implications for equities through year end.

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?

Today’s One Chart is the Financial Sector SPDR ETF, in a follow-up to our post in early June on the confluence of resistance levels. As we’ll discuss in this article, the XLF is displaying a similar combination of factors, all suggesting weaker prices and likely underperformance as the sector continues to struggle.

The biotechnology industry has apparently completed a transition from accumulation to consolidation to distribution. A confluence of support levels around $125 for the iShares Nasdaq Biotechnology ETF (IBB) give a clear potential downside target as further weakness appears likely.

Today’s One Chart is The Walt Disney Company (DIS). It’s an interesting chart because of the earnings beat this week and what that means for long-term potential appreciation, but also because it illustrates the concept of follow-through, or confirmation.