Here is a brief review of period-over-period change in short interest in the October 16-31 period in nine S&P 500 sectors.
XLB (SPDR materials ETF)
During October’s selling, XLB (54.98) went on to lose horizontal support at 56. This preceded a drop out of a slightly rising ascending channel. Pumped up, shorts aggressively added to short interest. The rally in the early part of November likely caused some squeeze. If bulls had their way, squeeze can continue. But the broken-support-turned-resistance at 56 already acted as a roadblock, as the ETF last Wednesday turned back after touching 56.03. The daily chart is overbought.
XLE (SPDR energy ETF)
Since December 2016, XLE (68.50) has been rejected at 78-plus several times, including a month ago. The subsequent selling last month stopped at 64-plus support. Both last week and the week before produced candles with long upper and lower shadows – encouraging from bulls’ perspective, having come after October’s rout. In the event of a rally, there is resistance at just north of 70.
XLF (SPDR financial ETF)
In September last year, XLF (27.12) broke out of 25, culminating in a rally to 30.33 by January this year. As the ETF came under pressure last month, bulls defended breakout retest toward the end of the month. A decent rally followed. This has pushed the ETF into overbought territory on a daily basis. Last week, the 50-day was tested – unsuccessfully.
XLI (SPDR industrial ETF)
XLI (72.42) traded within a rectangle from pretty much the beginning of the year, which it fell out of during last month’s collapse. If a measured-move approach of this breakdown fulfills, a technician in due course would be eyeing 62-63. After stabilizing late last month near 67, XLI crawled its way back into the box. Short interest is decent enough to cause a squeeze should bulls recapture momentum. But the daily is beginning to look extended.
