Bullish Case Losing Traction

As this week is somewhat of a vacation for me, I had a rare day where I missed about 95% of the trading action and am only now checking the patient’s vital signs. On a down day like today, I expect to see some more bullish bias creep into some of my contrarian sentiment indicators; much to my surprise, today things actually look worse for the bulls in that regard.

Now that it has been more than two months since I posted the chart below, I thought this evening might be a good time to update the three sectors I have been watching most closely since the March bottom. These 'indicator species' sectors are the financials (XLF), homebuilders (XHB), and consumer discretionary (XLY) stocks. As the chart shows, the financials and homebuilders recently moved above their 50 day simple moving average, only to fall sharply below that important technical level over the course of the past three days.

Until the XLF, XHB, and XLY can all close above their 50 day simple moving averages, I am likely to be skeptical of anything that has the appearance of a rally.