Marketview: Gap Down Edition – XLF, XLP, XLI, XLE

• Posted by DynamicHedge
• on July 31st, 2011

The market had a decidedly negative tone this week as it digested the uncertainty of the debt ceiling negotiations.  The media continues to stoke America’s unceasing obsession with fire and brimstone endings.  There were two very noteworthy market events this week.  First, the line in the sand at 1300 has been broken.  Second, the market gapped lower every single day this week.  The longer-term bearish case now has an increased probability of unfolding.  Market participants are not willing to step up and defend key levels here, and if they don’t soon, it may be beyond the tipping point.  As I have said before, I feel the higher probability event is this is consolidation for another leg up.  Unfortunately, losing 1300 is a big dent in the bull case.  Monday will be key.

Winners: $GS, $MET, $MO, $PM, $NSC, $UNP

Losers: $EMR, $WY, $MMM, $OXY, $DVN, $XOM

We have a reasonably busy week of economic reports ahead with non-farm payrolls reported on Friday.  Economic data has not been pretty lately and may come back into focus as the debt circus finally wraps up.

We are certainly at an inflection point.  The good news is that it will resolve itself soon.  The bad news is that in the mean time, the market is very difficult to navigate.  Best of luck.

Winners:

Losers:

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