First up is the XLF, it has performed strongly since the March 2009 market low and the stress test was initiate on 19 major financial institutions. Recently, the strength from this sector have diminished and starting to roll away from the major moving averages and broken below the price channel support. Unless it can hold the April high and the May low support, and the 50 SMA along with the 20 EMA can reverse direction, this bear market rally for the financial will come to an end.
The energy was another sector that has shown tremendous strength during this bear market rally. As crude oil moved above the $70 a barrel, the energy sector begins to top out. Recently, the price action on the XLE has broken down and it looks very likely to be heading lower. Very doubtful this sector will provide the strength to keep this bear market rally going.
Finally, the tech sector appears to be catching its last breath. It is still hanging in the price channel and holding minor support. This sector along with some defensive sectors could provide strength to continue this bear market rally for a bit longer. It is this wild card that the market has not shown us the direction it will take.
Without the participation from any of these three sectors, this bear market rally cannot be sustained. As the 'green shoots' started to brown, and lack of evidence a recovery is around the corner, other sectors will also roll over and headed down.
