Qs, IWM and XLF are showing almost identical chart patterns, having broken through the upper LR30 channel band for 2 days. Once again, these 3 ETFs are poised to kiss the channel good-bye to the upside. The mid panel technical are somewhat ambiguous, offering little guidance for the possibility of a sustained rally. Coupled with the weight of deteriorating fundamentals, an alternate scenario is a retracment back to the LR30 means, or if things get rolling , a retreat to the lower channel band with XLF and the Qs the most likely candidates as they approach overbought levels of the RSI.XLE is an another story entirely and fits nicely into the Butterfly options model which I mentioned some time ago with 47 providing a nice mean reversion pivot for the spread.
Many brokerages allow 3 legged trades for one commission. The expanded butterfly with 2 focus strikes (47 and 45) reflects a bearish outlook for XLE. Coupling 47 and 49 as target strikes would reflect a more bullish outlet. (not shown)
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