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During the recent market correction, XLP has shown relative strength to the broad market. Unlike most ETFs, XLP never came close to testing its 200-day MA. Further, as of Friday, XLP reclaimed support of both its 20-day and 50-day moving averages. XLP could present a buying opportunity on a test of, and pullback from, resistance near its most recent swing high of $34.50. Following a pullback from this level, we would look for XLP to form a lower high and a higher low. The lower high could potentially serve as a buy entry trigger, and the higher low could serve as a stop for the potential entry. It is too early to consider XLP as an official setup. However, since our market timing model could soon provide a buy signal, we must be prepared to seize opportunities on the long side of the market.

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