XLI

Industrials is a completely different story. So, industrials was on a relatively okay track and then all of a sudden it hooked around and is now very clearly back on a negative trajectory back deeper into the lagging quadrant.

So industrials went to an underperform outlook for the coming weeks because of this sharp rotation which happened inside improving just before crossing over into leading.

You've got your first trade today. XLI, the industrial sector ETF. industrial sector under a little bit of pressure over the last month here. How are you looking at industrials right now?

As a contrarian, this is uh the first trade here is very much largely predicated on what the Fed is going to do. You would think it would just maybe be some oil prices is putting, you know, the industrials under some pressure.

I think it goes far deeper than that. I think the US dollar is also going to play a large role in this as well as the bond market uh later in today's session. But I'm a huge contrarian in here.

What we're seeing in the XLI, if we take a look at the chart, which I'm going to in uh in just a moment, um is just wildly oversold conditions. I mean, this has had some fierce sellside activity.

One of the things that that I look at, and I'm very much a quantitative trader. I look at what's termed expected move, and that is what the option market depicts week-toeek risk to be.

And in five, count them, five consecutive weeks, the XLI has actually exceeded hit or exceeded its lower edge of expected move. That's how the option market again is looking at risk.

So if it says it's supposed to move three bucks, it's moving beyond that or or that full $3 and five consecutive weeks is statistically wild oversold conditions. I'm looking for just a brief, okay, but violent move back to the upside.

As such, I'm going to take an O 16 O 16 expiration. I'm going to buy the 172 calls, 172 calls, and sell the 177 calls against him. It's a $5 wide call spread that I'm purchasing.

It's very slightly out of the money. Looking for uh what we kind of term a a little bit of a rip back to the upside here. Possibly some short covering, possibly some new money coming in in a very very beaten down sector. this uh this $5 wide spread is trading right now at about a$130 debit.

As an example, I'm noticing here that XRT and XLI are in the in sync box and that they're in the late breakdown box. That tells me that there's a high probability that those are suffering daily cycle breakdowns.

XLI has obviously been lagging badly here and very much in line with what's happening uh with some of the names tied to the IWM. Uh 824 to 105 RS has turned down corrective mode.

What's going on with this overall translation? Still positive. Okay, still holding up, but a little bit weaker.