The Technical Dynamics Among The 11 Sector ETFs Have Stalled

Richard Suttmeier

The technology sector ETF remains the outperformer year to date with a gain of 19.3% year to date and in bull market territory 26% above its post-election low. The weekly chart has been upgraded back to positive from neutral.

In second place remains the healthcare sector ETF up 14.5% year to date and up 16.7% since its post-election low. The weekly chart has been upgraded to neutral from negative.

The finance sector has the largest post-election gain of 25.4% and it now has a neutral weekly chart. The financial ETF is below its all-time intraday high of $30.83 set during the week of June 2007, which is a sign that the banking system has not fully recovered from the “Great Credit Crunch”.

The only sector ETF in correction territory is still the energy sector ETF. It’s down 16.4% year to date and deep into correction market territory down 19.7% since its post-election high of $78.45 set on Dec. 12.

Here are This Week’s Scorecard For The 11 S&P 500 Exchange-Traded funds

SPDR Dow Jones REIT ETF (RWR)

The weekly chart for the REIT Sector ETF ($93.02 on Aug. 25) has a neutral weekly chart with the ETF above its five-week modified moving average of $92.66. The 200-week simple moving average is the “reversion to the mean” at $88.85, last tested during the week of Feb. 12, 2016 when the average was $81.06. The 12x3x3 weekly slow stochastic reading slipped to 46.89 last week down from 51.55 on Aug. 18.

Investment Strategy: Buy weakness to my weekly value level of $92.30. Sell strength to my monthly and semiannual risky levels of $95.58 and $97.61, respectively.

Materials Sector SPDR Fund (XLB)

The weekly chart for the Materials Sector ETF ($54.43 on Aug. 25) is neutral with the ETF above its five-week modified moving average of $54.22. The 200-week simple moving average is the “reversion to the mean” at $48.11, last tested during the week of July 1, 2016 when the average was $44.51. The 12x3x3 weekly slow stochastic reading declined to 55.23 last week down from 64.97 on Aug. 18.

Investment Strategy: Buy weakness to my quarterly value level of $47.60. Sell strength to weekly, semiannual and monthly risky levels of $55.15, $55.26 and $55.74, respectively. My annual risky level is $61.72.

Industrial Select Sector SPDR Fund (XLI)

Courtesy of MetaStock Xenith

The weekly chart for the Industrial Sector ETF ($67.50 on Aug. 25) is negative with the ETF below its five-week modified moving average of $67.85. The 200-week simple moving average is the “reversion to the mean” at $56.69, last tested during the week of Jan. 22, 2016 when the average was $47.92. The 12x3x3 weekly slow stochastic reading slipped to 53.52 last week down from 68.36 on Aug. 18.

Investment Strategy: Buy weakness to my quarterly value level of $65.11. Sell strength to my weekly, semiannual, monthly and annual risky levels of $68.37, $69.69, $69.84 and $70.05, respectively.

Consumer Discretionary Select Sector SPDR Fund (XLY)

The weekly chart for the Consumer Discretionary Sector ETF ($88.63 on Aug. 25) is negative with the ETF below its five-week modified moving average of $89.47. The 200-week simple moving average is the “reversion to the mean” at $76.09. The 12x3x3 weekly slow stochastic reading slipped to 40.88 last week down from 52.30 on Aug. 18.

Investment Strategy: Buy weakness to my quarterly value level of $87.57. Sell strength to my weekly, monthly, annual and semiannual risky levels of $89.99, $94.60, $97.00 and $97.38, respectively.

Consumer Staples Select Sector SPDR Fund (XLP)

The weekly chart for the Consumer Staples Sector ETF ($54.67 on Aug. 25) is negative with the ETF below its five-week modified moving average of $54.97. The 200-week simple moving average is the ‘reversion to the mean” at $49.56. The 12x3x3 weekly slow stochastic reading slipped to 31.86 last week down from 35.11 on Aug. 18.

Investment Strategy: Buy weakness to my annual value level of $46.91. Sell strength to my weekly, semiannual, annual and monthly risky levels of $54.91, $57.86, $58.03 and $58.62, respectively.

Energy Select Sector SPDR Fund (XLE)

Courtesy of MetaStock Xenith

The weekly chart for the Energy Sector ETF ($63.00 on Aug. 25) is negative with the ETF below its five-week modified moving average of $64.03. This ETF is below its 200-week simple moving average, or “reversion to the mean” of $75.34 last tested during the week of Dec. 16, when the average was $77.65. The 12x3x3 weekly slow stochastic reading slipped to 24.66 last week down from 29.94 on Aug. 18.

Investment Strategy: Buy weakness to my quarterly value level of $57.58. Sell strength to my monthly, weekly and semiannual risky levels of $63.56, $63.72 and $70.39.

Financial Select Sector SPDR Fund (XLF)

The weekly chart for the Financial Sector ETF ($24.81 on Aug. 25) is neutral with the ETF just above its five-week modified moving average of $24.71. The 200-week simple moving average is the “reversion to the mean” at $19.93, last tested during the week of July 1, 2016 when the average was $17.58. The 12x3x3 weekly slow stochastic reading slipped to 74.56 last week down from 79.66 on Aug. 18.

Investment Strategy: Buy weakness to my annual and quarterly value levels of $23.65 and $22.47, respectively. My semiannual pivot is $24.35. Sell strength to my weekly and monthly risky levels of $25.12 and $25.59, respectively. The $25.59 level was tested on Aug. 8. Note that this ETF is below 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 ($55.14 on Aug. 25) has a positive weekly chart with the ETF above its five-week modified moving average of $55.00. The 200-week simple moving average is the “reversion to the mean” at $45.93. The 12x3x3 weekly slow stochastic reading rose to 72.28 last week up from 64.70 on Aug. 18.

Investment Strategy: Buy weakness to my semiannual and annual value levels of $51.98 and $50.72, respectively. My weekly pivot is $55.16. Sell strength to my monthly and quarterly risky levels of $56.53 and $56.64, respectively.

Health Care Select Sector SPDR Fund (XLV)

The weekly chart for the Health Care Sector ETF ($78.95 on Aug. 25) is neutral with the ETF just below its five-week modified moving average of $78.97. The 200-week simple moving average is the “reversion to the mean” at $68.81. The 12x3x3 weekly slow stochastic reading slipped to 65.61 last week down from 73.36 on Aug. 18.

Investment Strategy: Buy weakness to my quarterly value level of $70.42. My annual and weekly pivots are $78.09 and $79.49, respectively. Sell strength to my monthly and semiannual risky levels of $82.23 and $87.40, respectively.

Technology Select Sector SPDR Fund (XLK)

The weekly chart for the Technology Sector ETF ($57.70 on Aug. 25) is neutral with the ETF above its five-week modified moving average of $57.11. The 200-week simple moving average is the “reversion to the mean” at $43.62, last tested during the flash crash of Aug. 24, 2015 when the average was $34.22. The 12x3x3 weekly slow stochastic reading slipped to 75.45 last week down from 76.83 on Aug. 18.

Investment Strategy: Buy weakness to my semiannual, annual and quarterly value levels of $55.95, $55.49 and $53.92, respectively. Sell strength to my weekly and monthly risky levels of $59.49 and $60.07, respectively.

iShares Transportation Average ETF (IYT)

Courtesy of MetaStock Xenith

The weekly chart for the Transportation Sector ETF ($164.46 on Aug. 25) is negative with the ETF below its five-week modified moving average of $166.41. The 200-week simple moving average is the “reversion to the mean” at $148.85, last tested during the week of July 8, 2016 when the average was $132.92. The 12x3x3 weekly slow stochastic reading declined to 40.29 last week down from 52.17 on Aug. 18.

Investment Strategy: Buy weakness to my weekly and quarterly value levels of $163.85 and $158.89, respectively. Sell strength to my monthly, semiannual and annual risky levels of $170.08, $181.18 and $182.54, respectively.

Methodology

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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