This past Monday, I asked three experts on the Presidential Cycle - Bruce Fraser, Jeff Hirsch, and Tom McClellan - to share their take on market trends around the election season. They delivered in a big way, and the result was a masterclass in how to learn from market history.

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.

Years ago, my wife and I were really into a TV show called The Biggest Loser. If you’ve never heard of it, the general premise was essentially a couple of personal trainers and fitness experts were featured on the show every week helping a group of people struggling with weight loss and body image. Over the course of the season you would see these individuals go through a dramatic multi-month transformation 30 minutes at a time, as they developed better habits and unwound destructive ones. Overall, it was pretty enjoyable to see people improve their lives, many of whom had come from very dark places not just physically, but emotionally and spiritually.

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.