It’s been a few weeks since I last shared a newsletter.
During this momentary pause, markets haven’t given me much reason to be at my desk. As I’ve contemplated this reality, charts - or the ones I follow at least - have simply moved sideways, popped higher and, more often than not, faded overnight.
Choppy waters, not a place I like to fish.
Under the surface, I’ve found plenty of reasons to kick back and enjoy the fading light of the late summer sun. Breadth has weakened, moving averages have been lost and retracements have been deeper than a welfare officer’s pockets. And then sure, yields, rate hike expectations, CPI yah-dah-yah-dah.
But now, things might be about to change.
With CTAs returning to their desks after a summer of pretending to love their wives at the beach, I’m optimistic that at the very least, we’re about to start trending again.
The Bull Lives
One of my favorite charts when assessing the underlying health of the bull market is XLY relative to XLP.
So long as this relationship continues trending higher above the support line, I see no reason to exit any of my long term positions, and remain open to upside moves in areas that have offered attractive retracements over the last few weeks.
Looking at SPY and the three PPO measures I use to assess short (bottom panel), medium (second bottom panel) and long term momentum, it’s clear that short-term shenanigans aside, the broader market remains in an uptrend.
Should the PPO flip red on the medium term guage, then sure, I’ll have to reassess this take. But for now, my belief is that my time is better spend identifying opportunities to buy the dip, rather than selling the rip.
In terms of positioning, survey-based NAAIM exposure (take with a pinch of salt, because survey) has cooled since eclipsing the ‘all in’ level a few weeks back.
For bulls, this is good news, with elevated yields, geopolitical jitters and AI-funding concerns clearing the decks a little. Are we low enough to say there’s a wall of worry to climb? Probably not, but with yields hitting 5% in certain areas, I’m not closed to the idea that the shortened Labor Day week will have spooked some of the weaker hands away from the market.
Areas I’m Watching: XLY
XLY looks interesting to me here. Whilst price has chopped in a broad range dating back to May of last year, I’m tempted to add a position here using yesterday’s low as my stop. Not only is price sitting in the golden pocket, there’s also a broader potential H&S pattern setting up, with a break above the neckline potentially fueling the market’s next leg higher.
Adding to this thesis, it’s notable - to me at least - how extreme the underperformance of RSPD has been over a 100-day trailing return vs the benchmark. At 2SD below the typical range, history has shown this to be a savvy buy zone during bull markets, with the prior dip to these levels in mid-2022 preceding a +25% move for XLY.
Utilities
XLU is another sector that has my attention. With price hovering at the AVWAP from the April 2025 low, there’s a clear level to bet against here in my view.
Sure, sector breadth (measured by $BPUTIL in the lower pane) looks iffy, but rather seeing this as a signal to get short, history shows that readings below 30 on this guage have proven to the savvy buy zones.
On a relative basis, RSPU - like RSPD - is sitting in the doldrums, with plenty of potential room to run into should the chart find traction at these levels.
MAGS
MAGS has had a weird year, spending almost every week of 2026 below a declining 30WMA. Not a great look, which may explain the relatively weak YTD performance.
But with price looking to flip the 30WMA from resistance into support, there’s a chance that this might be about to change.
On the daily, MAGS is looking to breakout from a tightening formation, evidenced best by the tightening BBW shown in the bottom pane. I’m a buyer above $70.
Core Holdings
CMPS continues to consolidate above the all-important IPO AVWAP and key pivot. I don’t anticipate an outsized move here until FDA approval is confirmed - hopefully in Q4 of this year, but let’s wait and see.
MOS popping above the 200dma with a long-term PPO flipping green. Might want to retest the breakout level, but I’m happy with how this one is performing thus far.
VIST holding above the YTD low AVWAP and 200dma. PPO is bullish and the chart looks constructive. Wen breakout?
MAGS see earlier comments.
SAIL consolidating at the IPO AVWAP and holding the 50dsma. So long as the latter rings true at the weekly close, I’ll keep holding.
AMZN holding the upwardly mobile 50dsma after a brief dip below to a key retracement zone. Solid RR at 1x ATR below yesterday’s low.
Disclaimer
The information contained in this article is provided for educational and informational purposes only and reflects my personal opinions at the time of writing. Nothing here should be interpreted as financial advice, a recommendation to buy or sell any security, or a guarantee of future performance.
As always, do your own research, consider your own financial circumstances, and never invest money you cannot afford to lose. I may hold positions in securities mentioned throughout this article, and those positions may change without notice.