Morpheus Trading: SPDR S&P Pharmaceuticals (NYSEARCA:XPH) has been leading the market higher all year. So far, little has changed because $XPH continues to trend higher above its 50-day moving average.
The price has lost a bit of momentum over the past few weeks, as $XPH looks to be forming a late stage base at the highs.
A late-stage base is one that can easily move higher because there is so much momentum on the weekly and daily charts. However, this sort of base is better suited for the agile swing trader, rather than intermediate-term position trader, because the trend might not have much left in the tank.
$XPH may need another week or two of consolidation around $78 (due to last Friday’s false breakout attempt). We typically see false breakouts pullback for three to five days before reversing higher, but if the market retraces off the highs, we could see a deeper pullback to the 50-day moving average (around $77):
As initially discussed in our August 23 commentary, we continue to monitor for a potential, low-risk short entry into iShares Dow Jones US Real Estate (NYSEARCA:IYR).
The nasty breakdown on big volume in May and June was the first major sign that the real estate sector was in big trouble.
The bounce off the lows in July that stalled at the declining 10-week moving average produced a lower high, which was another clue.