I am currently holding this ETF long.



- XLY is a sector I consider to be overvalued. At the same time, many consumer discretionary stocks carry high short interest, so breakouts get extra fuel from short covering. Price currently sits below a double top. While I am not looking to trade the long side on consumer stocks, an XLY break above 24.60 would certainly be a bullish signal for the broader market.



- IYR is another overvalued ETF in my book. But it's still trending higher for now. A break above 35.60 would put price above recent closing highs, and also the 200 day moving average.



- XLF is trading in a narrowing range near the 200 day moving average. I get the sense that the financials could be the cloud that rains on the bulls' parade, but for now the chart looks neutral.



So, we are still consolidating for now. Until the signals become clearer, the best strategy would be to keep the powder dry. At the same time, so many charts are sitting immediately under critical resistance, we could easily see a scenario where many sector ETFs trigger buy signals at nearly the same time. I have given my alert levels above. If the market should start to move higher out of this consolidation, each alert would give further evidence of a broader market breakout.

Of course, underlying this potential bullish scenario is a sick economy. I actually came into the weekend expecting to see a more bearish scenario, and continue to think this market is overvalued at current levels. However, looking at the charts, the bulls have a much easier path to pushing momentum in their direction.

I will have individual stock charts up later this weekend.