Of late, due to the elections last week, much of the media is talking about “new leadership.” Today I would like to discuss “old leadership” and why from a Power of the Pattern perspective, we humbly feel a leading sector is testing a key level, that could impact the broad markets.

What this leader does here, could be huge for the next big move in the broad markets. Below compares Bio-Tech ETF (IBB) with the broad markets, since the 2009 lows.

From the 2009 lows until 2015, IBB lead the broad market higher at (1). Once IBB started turning weak in the summer of 2015, IBB and SPY were both weak at (2). Once IBB hit a low in February of 2016, IBB and SPY both rallied at (3). Now IBB is testing the top of its range and falling resistance at (4). This represents a key breakout test for IBB. Risk On trade in the broad markets, wants/needs leadership to breakout at (4). Risk On trade does NOT want to see IBB create a reversal pattern and turn weak at this key test!