How To Trade The 11 Sectors Of The S&P 500 Using ETFs

Richard Suttmeier

The technology sector ETF remains the outperformer through September with a gain of 22.2% and in bull market territory 29% above its post-election low. The weekly chart remains positive but overbought, and set an all-time intraday high of $59.37 on Oct. 2.

In second place through September is the healthcare sector ETF up 18.6% year to date and in bull market territory up 20.8% since its post-election low. The weekly chart is positive and the ETF set its all-time intraday high on Sept. 13.

The finance sector is the strongest sector since the election with a bull market gain of 30.7% through September. The financial ETF is below its all-time intraday high of $30.83 set during the week of June 2007, but set a post-election high of $26.08 on Oct. 2.

The only sector ETF in correction territory remains the energy sector ETF, down 12.7% since its post-election high of $78.45 set on Dec. 12. Its weekly chart remains positive.

The materials and industrial sector ETFs are gaining momentum with new all-time highs set on Oct. 2 at $57.42 and $71.48, respectively.

The retail ETFs, consumer discretionary and consumer staples ended September with neutral and negative weekly charts, respectively, which questions economic strength as the consumer represents about 70% on the economy.

SPDR Dow Jones REIT ETF (RWR)

The weekly chart for the REIT Sector ETF ($92.51 on Sept. 29) has a negative weekly chart with the ETF below its five-week modified moving average of $92.98. The 200-week simple moving average is the “reversion to the mean” at $89.26, last tested during the week of Feb. 12, 2016 when the average was $81.06. The 12x3x3 weekly slow stochastic reading slipped to 61.10 last week down from 63.79 on Sept. 22.

Investment Strategy: Buy weakness to my weekly value level of $91.96. Sell strength to my monthly risky level of $93.40.

Materials Sector SPDR Fund (XLB)

The weekly chart for the Materials Sector ETF ($56.80 on Sept. 29) is positive with the ETF above its five-week modified moving average of $55.51. The 200-week simple moving average is the “reversion to the mean” at $48.35, last tested during the week of July 1, 2016 when the average was $44.51. The 12x3x3 weekly slow stochastic reading rose to 76.09 last week up from 69.10 on Sept. 22.

Investment Strategy: Buy weakness to my monthly value level of $56.47. Sell strength to my semiannual risky level of $59.41. My quarterly and annual risky levels are $60.49 and $61.72, respectively.

Industrial Select Sector SPDR Fund (XLI)

Courtesy of MetaStock Xenith

The weekly chart for the Industrial Sector ETF ($71.00 on Sept. 29) is positive with the ETF above its five-week modified moving average of $69.27. The 200-week simple moving average is the “reversion to the mean” at $57.10, last tested during the week of Jan. 22, 2016 when the average was $47.92. The 12x3x3 weekly slow stochastic reading rose to 73.24 this week up from 61.76 on Sept. 22.

Investment Strategy: Buy weakness to my weekly value level of $69.22. My annual pivot is $70.05. Sell strength to my monthly, semiannual and quarterly risky levels of $72.54, $73.90 and $74.61, respectively.

Consumer Discretionary Select Sector SPDR Fund (XLY)

The weekly chart for the Consumer Discretionary Sector ETF ($90.08 on Sept. 29) is positive with the ETF above its five-week modified moving average of $89.70. The 200-week simple moving average is the “reversion to the mean” at $76.60. The 12x3x3 weekly slow stochastic reading inched up to 36.01 this week up from 34.06 on Sept. 22.

Investment Strategy: Buy weakness to my weekly value level of $87.93. Sell strength to my quarterly, monthly annual and semiannual risky levels of $93.41, $94.33, 97.00 and $98.95, respectively.

Consumer Staples Select Sector SPDR Fund (XLP)

The weekly chart for the Consumer Staples Sector ETF ($53.98 on Sept. 29) is negative with the ETF below its five-week modified moving average of $54.69. The 200-week simple moving average is the ‘reversion to the mean” at $49.79. The 12x3x3 weekly slow stochastic reading slipped to 35.11 last week down from 39.33 on Sept. 22.

Investment Strategy: Buy weakness to my annual value level of $46.91. Sell strength to my monthly, annual, quarterly and semiannual risky levels of $57.28, $58.03, $59.72 and $60.53, respectively.

Energy Select Sector SPDR Fund (XLE)

Courtesy of MetaStock Xenith

The weekly chart for the Energy Sector ETF ($68.48 on Sept. 29) is positive with the ETF above its five-week modified moving average of $65.79. This ETF is below its 200-week simple moving average, or “reversion to the mean” of $74.93 last tested during the week of Dec. 16, when the average was $77.65. The 12x3x3 weekly slow stochastic reading rose to 61.58 last week up from 47.95 on Sept. 22.

Investment Strategy: Buy weakness to my weekly and monthly value levels of $64.86 and $61.77, respectively. Sell strength to my semiannual and quarterly risky levels of $72.07 and $73.95, respectively.

Financial Select Sector SPDR Fund (XLF)

Courtesy of MetaStock Xenith

The weekly chart for the Financial Sector ETF ($25.86 on Sept. 29) is positive with the ETF above its five-week modified moving average of $25.01. The 200-week simple moving average is the “reversion to the mean” at $20.09, last tested during the week of July 1, 2016 when the average was $17.58. The 12x3x3 weekly slow stochastic reading rose to 63.88 last week up from 54.89 on Sept. 22.

Investment Strategy: Buy weakness to my weekly and annual value levels of $24.60 and $23.65, respectively. My semiannual, quarterly and monthly pivots are $25.68, 25.79 and $25.86, respectively. Sell strength to its June 2007 high of $30.83.

Utilities Select Sector SPDR Fund (XLU)

Courtesy of MetaStock Xenith

The weekly chart for the Utilities Sector ETF ($53.05 on Sept. 29) is negative with the ETF below its five-week modified moving average of $53.89. The 200-week simple moving average is the “reversion to the mean” at $46.23. The 12x3x3 weekly slow stochastic reading declined to 71.34 last week down from 80.51 on Sept. 22 falling below the overbought threshold of 80.00.

Investment Strategy: Buy weakness to my annual value level of $50.72. Sell strength to my semiannual, monthly and quarterly risky levels of $55.51, $56.35 and $57.22, respectively.

Health Care Select Sector SPDR Fund (XLV)

The weekly chart for the Health Care Sector ETF ($81.73 on Sept. 29) is neutral with the ETF above its five-week modified moving average of $80.92. The 200-week simple moving average is the “reversion to the mean” at $69.37. The 12x3x3 weekly slow stochastic reading slipped to 77.30 last week down from 78.86 on Sept. 22.

Investment Strategy: Buy weakness to my annual value level of $78.09. My quarterly pivot is $82.58. Sell strength to my monthly and semiannual risky levels of $86.10 and $92.43, respectively.

Technology Select Sector SPDR Fund (XLK)

The weekly chart for the Technology Sector ETF ($59.10 on Sept. 29) is positive but overbought with the ETF above its five-week modified moving average of $58.11. The 200-week simple moving average is the “reversion to the mean” at $44.12, last tested during the flash crash of Aug. 24, 2015 when the average was $34.22. The 12x3x3 weekly slow stochastic reading rose to 86.84 last week up from 83.97 on Sept. 22 moving further above the overbought threshold of 80.00.

Investment Strategy: Buy weakness to my annual value level of $55.49. My semiannual pivot is $58.49. Sell strength to my quarterly and monthly risky levels of $61.15 and $62.25, respectively.

iShares Transportation Average ETF (IYT)

Courtesy of MetaStock Xenith

The weekly chart for the Transportation Sector ETF ($178.42 on Sept. 29) is positive with the ETF above its five-week modified moving average of $171.03. The 200-week simple moving average is the “reversion to the mean” at $149.76, last tested during the week of July 8, 2016 when the average was $132.92. The 12x3x3 weekly slow stochastic reading rose to 57.62 last week up from 47.15 on Sept. 22.

Investment Strategy: Buy weakness to my quarterly and monthly value levels of $173.93 and $173.56, respectively. Sell strength to my annual and semiannual risky levels of $182.54 and $193.18, respectively.

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