How To Trade The 3 ‘Flight To Safety’ ETFs, The 5 Equity Averages ETFs And The 11 S&P Sector ETFs


The S&P 500 ^GSPC is divided into 11 sectors and each sector can be traded using its own exchange-traded fund. The Utilities Select Sector SPDR Fund (XLU) is also one of the three “flight to safety” ETFs. The iShares Transportation Average ETF (IYT) represents one of the five major equity averages.

This report is your guide to investing, trading and asset allocation among 17 exchange-traded funds.

Investors should focus on the basic technical analysis tools focusing on weekly charts, and the value levels at which to “buy on weakness” and risky levels at which to “sell on strength”.

When looking at the weekly charts below, keep an eye on the 200-week simple moving averages shown in green. Investors should consider this level as the "reversion to the mean". The "reversion to the mean" is an investment theory that the price or an index, stock or ETF, will eventually return to a longer-term simple moving average, and the 200-week is simple to track. A ticker trading above its “reversion to the mean” will eventually decline back to it on weakness. Similarly, a ticker trading below its “reversion to the mean” will eventually rebound to it on strength.

When reading a weekly chart, you will see the five-week modified moving average in red. At the bottom of the graph from left to right, you will see a measure of technical momentum. I advocate the 12x3x3 weekly slow stochastic, which scales from 0.00 to 100.00. Readings rising or overbought above 80.00 are positive. Readings declining of oversold below 20.00 are negative. A technical buy signal occurs when stochastics rises above 20.00 with the ticker ending the week above its five-week modified moving average. A technical sell signal occurs when stochastics falls below 80.00 with the ticker ending the week below its five-week modified moving average.



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