Several sector ETFs have formed head and shoulders patterns, or are sitting beneath a cluster of moving averages. Considering the increased selling activity of late, the frequency of this pattern through several sectors should be a strong warning of further downside to come. First, many people are watching the head and shoulders in S&P charts. Personally I don't think it's the cleanest pattern, but here's a look at SPY (these charts are taken from approximately 30 minutes before the close):
- XLI is much cleaner, and price broke below the neckline today. Also note the declining 200 day moving average.
- IYT: Not really a great h&s, if one at all, but certainly a weak chart, and also worth looking at for those who give credence to Dow theory.
- IYR: A cleaner h&s, but not yet broken. I think it's just a matter of time. Also note the 50 and 200 day moving average clustered above current price, providing resistance.
- XLF: Price is on the verge of breaking key support.
