Good morning Surfers,
here we go again with the mid-week appointment.
Although the rate of article publication will decrease in August, I have prepared an update article from what I told you in the last market recap:
RISK OFF continues.
Are small caps ready for the breakout?
Cracks open in the short term
If something was creaking last Friday, now real cracks are opening up! → Reports RISK ON Creaking
I am currently concerned about the XLY:XLP ratio, which continues to move downward along with price action, and this suggests that we may see further selling.
Here is the hourly chart of XLY:XLP:
This is not a short-term positive and, combined with the daily negative divergences that we have been talking about for some time, tells me that the risks are probably tilted toward a downward continuation.
NB:
We see only XLY:XLP, but the other ratios shown in the market recap don't fare well either,proving that at this time value and industry is preferred.
The only exception is the ratio Transportation vs Utilities which continues to push upward.
Small caps on the brink of breakout?
Remember when I said 2 months ago to be careful with small caps?
Here is the situation exactly 8 weeks after the article Prepare for the rotation to Small Cap.
Small caps are trying to break through a VERY significant resistance level. In fact, the small-cap sector nhas not closed above 198.00 since April 2022 - 15 months ago.
If we break through 198, I see the potential for consolidation between 198-205, while above 205 I see no significant obstacle until 238.
Relative strength is increasing, and the volume profile on the weekly is bullish, as we will see in the next post.