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Taking the Other Side:   I am not going out on a limb here stating that we are in a very volatile seasonality period and coming off a big run it makes sense to maybe take some rapid gains off the table. My trading style is longer term, but in times like these technical analysis comes in handy, where one can shave around core positions and wait for nearer the Q4 period where it would make sense to hold more patiently. Below could be a good example of that with the chart of META. Almost all I speak with are on the long bandwagon and I am happy to take the other side of the trade. Of course, if the 540 level is taken out on a CLOSING basis I will lick my wounds and move on to the next opportunity, but I think this is ripe for a tactical short. This is classified as a communication services play but has a profound impact on technology and just looking at the daily chart below notice the very wide and loose overall trade, a hallmark bearish trait. Its MONTHLY chart shows it may be tiring a bit, and with good reason following a 15 of 16-month win streak, not a typo, after a bounce off the very round par number in late 2022. Since then we had a bearish evening star completed in April, a spinning top in July, and a possible hanging man so far in August (all circled). The weight of the evidence suggests a prudent pause here and some give back before a late 2024 run higher.

"Healthy" Hazard: The diverse healthcare space on a YTD basis is trading right in the middle of the pack up 10%, fifth best among the 11 major S&P sectors. A solid, yet pedestrian move as some rotation continues into defensive areas into the teeth of the summer doldrums, which of course as we know tend to be volatile. Below is the longer-term WEEKLY look at the XLV and it has something for both bull and bears although they must favor the former as a nice uptrend is in place. The naysayers will claim that it is not distancing itself from the breakout area above the bull flag, as we know the best breakouts tend to work right away and act well POST breakout. The XBI MONTHLY chart continues to be repelled at the very round par number, but give it credit for breaking ABOVE a bearish head and shoulders formation, and we know from FALSE moves can come fast ones in the opposite direction. Notice too it has formed a bull flag with the trigger right at pesky 50 MONTH SMA resistance. This overall sector should perform well as it has something for most investors. Conservative ones will clamor the dividend and maturity, and those looking for some growth could add exposure to the biotechs.

Industrial Strength Ahead? As defensive rotation continues in the markets with real estate, utilities, and healthcare the top three major S&P sectors over the last one-month period, the industrials are in hot pursuit rising almost 3%. Seasonality is interesting with the XLI as notice the first 6 months of the year average an UNCH return essentially, but the second half of the year brings in the volatility, but once Q3 is in the rearview mirror, Q4 shines. September is the outlier month in the last 4 years down almost 6% with ZERO months CLOSING above where they began. Looking internally one of the best subsectors within has been the railroads, which do question the recession ramblings. NSC has been acting the firmest and now sports a bull flag pattern, which started with a successful retest of a break above the downtrend. A break above the 245 pivot carries a measured move to 270 in the near term. Of course, on the flip side, CNI has fallen 15 of the last 20 weeks. Stock selection is crucial and XLI bulls want to see the daily chart of the ETF start to trade a bit tauter. But looking under the sector surface shows some emerging leaders.

Tasty Reaction: Earnings season is starting to wane as the summer wears on and of course, it is impossible to know what will happen when specific names report. Among the casual diners, one of the better-looking charts in the space is the one below of SG. The stock is up handsomely and obviously, this may not translate to the opening PRICE Friday morning or how it CLOSES on Friday but thus far as of 8pm EST it has been well received up more than 20%. Give it credit for holding near the prior double-bottom breakout from its prior earnings reaction on 5/10 that vaulted 34% (and the previous one jumped 24.8% on 3/1). Its WEEKLY chart for the last 4 weeks was retesting a bull flag breakout and the MONTHLY chart suggests this can have a run to the very round 50 number, a measured move of a break above 30 with the flag pole commencing at the 10 figure. Peer SHAK has been behaving well and recently posted its third straight positive earnings reaction with gains of 16.9, 1.6, and 26 on 8/1, 5/2, and 2/15 respectively. Its MONTHLY chart is sporting a cup with handle pattern with a breakout pivot of 111 to be bought.

Checking Under the Hood: In the consumer discretionary space there are several ways to gauge the overall temperature. First one could look at the ratio chart comparing the staples (XLP) to the XLY, and if we did that we could certainly see a "risk off" environment. The XLP has been outperforming and recently broke above a nice cup base pattern. Other ways include contrasting the broader XRT to the XLY, to see if it is just AMZN and TSLA pushing the latter ETF higher. Below we take a peek at yet another way with the chart of the equal weight consumer discretionary ETF in the RSPD. Its daily chart below shows the instrument sinking and its WEEKLY chart is looking at a 4 week losing streak starting with the bearish shooting star the week ending 7/19 which also retested the peak of a bearish three black crows pattern after the big run from the last October lows. We spoke about this recently being the only major S&P sector in the red on a YTD basis, and perhaps this alone could be a good indicator of recession as we know 2/3rds of GDP emanates from consumer spending. I am no economist but this group is struggling and the weakness is pervasive.