Markets used the final month of summer to push riskier markets lower, such as equities, as lower volumes meant bullish participants could not put up as much of a fight.
The SPDR S&P 500
The S&P 500 is in a well-defined upward sloping channel but within that the prices are moving toward the channel's lows. As we remain in a state of uncertainty surrounding U.S. monetary policy and a resolution to the conflict in Syria, equities should continue to drift lower.
The next chart is a relative strength measure of Energy Select Sector SPDR
Brent crude oil prices spiked higher as fear of potential supply disruptions due to the Syria conflict mounted.
The energy sector had been an extreme laggard for many months as fears of global growth and higher U.S. interest rates kept the commodity sector suppressed.
Similarly, the fear over Syria incited investors to buy U.S. Treasury bonds pushing yields lower and allowing commodities to push higher.
The spike higher could just be a reactionary move to geopolitical conflict, however, not completely justified by fundamentals. If this is the case, then expect energy and interests to correct back to their previous trend as the premium for political tension that is priced in gradually diminishes.
The last chart is a relative strength measure ofConsumer Discretionary Select Sector SPDR
On Thursday, however, the United States reported gross domestic product data that greatly outperformed expectations. Consumer spending accounts for a large part of the measurement, which is bullish for discretionary companies.
If higher interest rates continue later into the year it will surely weigh on the consumer, which could provide potential resistance against the discretionary sector breaking out of its down trending channel and initiating market leadership.
At the time of publication the author had no position in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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