But, there’s more to the story. Breakouts failing to print is just one half of it.
BreakDOWNs are not sticking, either.
There is simply no directional bias in either direction. Resolutions are hard to come by. False starts, failed moves, and whipsaws are the norm. Both bulls and bears are getting chopped up and shook around.
I wanted to share a few failed breakdowns that stood out to me today, as this is an important distinction to make in a messy market environment.
Here’s Energy $XLE:
After exploring a breakdown to lows not seen since Q1 of last year, bulls stepped in and reversed it.
XLE shook below the double-top breakdown level for a few sessions before digging in and ripping higher.
This failed move has already resulted in a fast move higher. XLE has gone from an extreme oversold reading to just about overbought in less than a month.
Next is Health Care $XLV:
This one was also sitting around fresh 52-week lows with momentum at an extreme oversold level recently.
Bears had their chance to knock it down and complete the top, but couldn’t get the job done. XLV has fired higher off the breakdown level over the past few weeks.
Last but not least, here is Materials $XLB:
After collapsing to its lowest level since February, XLB is soaring higher this week.
What looked like a clean break below a well-tested level of former resistance, has now morphed into a bear trap.
We’re one green candle away from an epic scoop n’ score for materials.
The takeaway here is simple. These are three of the worst-performing sectors since the back half of last year. It doesn’t matter though. Bears still can’t take control of these trends.
These sectors just hit some of their most oversold readings in history. And with all that selling pressure, they didn’t even break down.
If you tried to short these laggards, you just got smoked.
The same thing would have happened if you tried to buy the recent breakouts in small-caps, transports, or even the market darling, Nvidia. They all failed and rolled over.
So whether you are buying breakouts or shorting breakdowns, you are probably struggling out here.
It’s a messy market. And it’s the case for both bulls and bears.
Trendless.
Don’t fight it. Listen to it.
I think it’s a good time to buy the lower bounds of ranges instead of the upper bounds. I think we can anticipate failed moves to get better entries. I think we can be quicker to take profits.
But I don’t think we should keep buying breakouts if the market keeps punishing us for it.
As for our Breakout Multiplier system, we’ll be buying more range lows and betting on more mean-reversion setups for now. Don’t let the name confuse you. We’re not limited to buying breakouts. We do whatever we want. Click here to join us.
That’s where my head is at. Let me know what you think.
