Traders Club – Weekly ETF Report – How To Trade 20 Popular Exchange-Traded Funds

Richard Suttmeier

Click here and Join Traders Club using the "Follow" Link ttps://www.themaven.net/richardsuttmeier/

Please contact me with comments and questions via email RSuttmeier@gmail.com

Five Exchange-Traded Funds For The Five Major Equity Averages

The five major U.S. equity averages can be traded using ETFs. The Dow Jones Industrial Average and S&P 500 are represented Diamonds and Spiders, respectively. The Nasdaq 100 is represented by the QQQ’s, Transports by iShares IYT and the Russell 2000 by iShares IWM.

Investors can still reduce holdings on strength to my risky levels. My advice remains the same. Reduce holdings by 50% on strength to risky levels.

Let’s say you invested $100,000 into the stock market and it’s now worth $300,000. If you reduce holdings by 50% you still have $150,000 in the stock market, more than you started with. Your original invested is now fully-protected with an extra $50,000 in the bank. This is a prudent investment strategy.

SPDR Dow Jones Industrial Average ETF (DIA)

Courtesy of MetaStock Xenith

The weekly chart for Diamonds ($223.20 on Sept. 22) is positive but overbought with the average above its five-week modified moving average of $219.41. The ETF is above its 200-week simple moving average or “reversion to the mean” at $180.75, last tested during the week of Feb. 12, 2016 when the average was $157.98. The 12x3x3 weekly slow stochastic reading rose to 80.22 last week moving above the overbought threshold of 80.00.

Investment Strategy: Buy weakness to my annual and semiannual pivots of $220.14 and $214.93, respectively. Sell strength to my monthly risky level of $225.32. My annual value level lags at $150.83.

SPDR S&P 500 ETF Trust (SPY)

Courtesy of MetaStock Xenith

The weekly chart for Spiders ($249.44 on Sept. 22) is positive with the ETF above its five-week modified moving average of $246.73. The 200-week simple moving average or “reversion to the mean” is $209.28. The 12x3x3 weekly slow stochastic reading rose to 76.17 last week up from 71.88 on Sept. 15.

Investment Strategies: Buy weakness to my weekly value level of $246.86. Sell strength to my semiannual and annual risky levels of $252.96 and $253.37, respectively. My annual value level lags at $167.75.

PowerShares QQQ Trust ETF (QQQ)

Courtesy of MetaStock Xenith

The weekly chart for QQQ’s ($144.32 on Sept. 22) is positive with the ETF above its five-week modified moving average of $143.63. The 200-week simple moving average or “reversion to the mean” is $110.03. The 12x3x3 weekly stochastic reading rose to 79.66 last week up from 77.49 on Sept. 15.

Investment Strategy: Buy weakness to my annual pivot of $139.42. My weekly pivot is $143.68. Sell strength to my semiannual risky level of $146.49, which was tested at the all-time intraday high of $146.59 set on Sept. 15.

iShares Transportation Average ETF (IYT)

Courtesy of MetaStock Xenith

The weekly chart for the Transportation Sector ETF ($175.09 on Sept. 22) is positive with the ETF above its five-week modified moving average of $169.18. The 200-week simple moving average is the “reversion to the mean” at $149.51, last tested during the week of July 8, 2016 when the average was $132.92. The 12x3x3 weekly slow stochastic reading rose to 47.15 last week up from 39.23 on Sept. 15.

Investment Strategy: Buy weakness to my monthly value level of $170.91. Sell strength to my semiannual and annual risky levels of $181.18 and $182.54, respectively.

iShares Russell 2000 ETF (IWM)

Courtesy of MetaStock Xenith

The weekly chart for the small caps ETF ($144.30 on Sept. 22) is positive with the ETF above its five-week modified moving average of $140.58. The 200-week simple moving average or “reversion to the mean” is $120.96, last tested during the week of July 1, 2016 when the average was $108.66. The 12x3x3 weekly slow stochastic reading rose to 58.66 last week up from 49.88 on Sept. 15.

Investment Strategy: Buy weakness to my weekly value level of $140.53. Sell strength to my semiannual and annual risky levels of $144.61 and $154.33, respectively.

Flight To Safety Exchange-Traded Funds

“Flight to safety” investors concentrate on the exchange-traded funds associated with U.S. Treasury bonds, gold bullion and utility stocks, but you can also trade commodities and the dollar.

The Treasury Bond ETF (TLT) traded to a fresh 2017 high of $129.56 on Sept. 7, and then declined to $125.33 after the FOMC meeting on Sept. 20. The Gold Bullion ETF (GLD) set its 2017 high of $128.32 on Sept. 7, and then declined to $122.49 on Sept. 21. The Utility Stock ETF (XLU) set its all-time intraday high of $55.90 on Sept. 11, and then traded as low as $53.23 on Sept. 22. The Junk Bond ETF (JNK) set its 2017 high of $37.46 on July 26, and then traded as low as $36.68 on Aug. 8, establishing a trading range. The Commodities ETF (GSG) set a post-election low of $13.16 on June 21, and this heavily-weight to energy futures fund is now above its 200-day simple moving average of $14.67. The Dollar ETF (UUP) traded to its post-election low of $23.66 on Sept. 8 and rebounded to $24.07 following the FOMC meeting on Sept. 20.

The 20+ Year Treasury Bond ETF (TLT)

Courtesy of MetaStock Xenith

The U.S. Treasury 30-Year Bond ETF trades like a stock using the 20+ Year Treasury Bond ETF, which a basket of U.S. Treasury bonds with maturities of 20+-Years to 30-Years. As a stock-type investment it never matures and interest income is converted to periodic dividend payments.

The weekly chart for the Treasury Bond ETF ($126.20 on Sept. 22) is negative with the ETF below its five-week modified moving average of $126.48 and above its 200-week simple moving average of $122.52 or the “reversion to the mean”, which had been a magnet between the week of Nov. 25 and the week of May 12, when the average was $120.63. The 12x3x3 weekly slow stochastic reading slipped to 70.53 last week down from 71.64 on Sept. 15.

Investment Strategy: Buy weakness to my semiannual value level of $125.69. Sell strength to my annual risky level of $132.13.

The Gold Bullion ETF (GLD)

Courtesy of MetaStock Xenith

Investors can trade gold bullion like a stock using the SPDR Gold Shares ETF.

The weekly chart for the Gold Bullion ETF ($123.24 on Sept. 22) is neutral with the ETF below its five-week modified moving average of $123.49 and above its 200-week simple moving average of $117.86, which is the “reversion to the mean” last tested during the week of July 21 when the average was $118.29. The 12x3x3 weekly slow stochastic reading slipped to 84.50 last week down from 86.89 on Sept. 15, still above the overbought threshold of 80.00.

Trading Strategies: Buy weakness to my quarterly value level of $119.28. Sell strength to my monthly risky level of $131.57 with my annual risky levels of $159.17 and $160.24.

The Utilities ETF (XLU)

Courtesy of MetaStock Xenith

Investors seeking the safety of dividends can trade the utilities ETF, which is a basket of 28 utility stocks.

The weekly chart for the Utilities Sector ETF ($53.23 on Sept. 22) will be downgraded to neutral if the ETF ends this week below its five-week modified moving average of $54.10. The 200-week simple moving average is the “reversion to the mean” at $46.16. The 12x3x3 weekly slow stochastic reading slipped to 80.51 last week and will decline below its overbought threshold of 80.00 this week.

Investment Strategy: Buy weakness to my semiannual and annual value levels of $51.98 and $50.72, respectively. Sell strength to my weekly, monthly and quarterly risky levels of $55.57, $56.52 and $56.64, respectively.

SPDR Bloomberg Barclay’s High Yield Bond ETF (JNK)

Courtesy of MetaStock Xenith

Investors should avoid junk bonds as they correlate more to stocks than U.S. Treasuries.

The weekly chart for the junk bond ETF ($37.20 on Sept. 22) is positive with the ETF above its five-week modified moving average of $37.10. The ETF is below its 200-week simple moving average or the “reversion to the mean” of $37.77 last tested during the week of Nov. 14 when the average was $40.08. The 12x3x3 weekly slow stochastic reading rose to 49.52 last week up from 47.36 on Sept. 15.

Investment Strategy: Buy weakness to my semiannual value level of $34.68. Sell strength to my monthly and annual risky levels of $37.93 and $43.98, respectively.

iShares S&P GSCI Commodity-Indexed Trust ETF (GSG)

Courtesy of MetaStock Xenith

The commodity ETF is heavily-weighted to energy by about 60%.

The weekly chart for the commodity ETF ($14.90 on Sept. 22) is positive but overbought with the ETF above its five-week modified moving average of $14.50. The ETF is well below its 200-week simple moving average or the “reversion to the mean” of $20.32, last tested during the week of July 11, 2014 when the average was $33.40. The 12x3x3 weekly slow stochastic reading rose to 83.87 last week rising above the overbought threshold of 80.00.

Investment Strategy: Buy weakness to my monthly value level of $13.65. Sell strength to my annual risky level of $22.73.

PowerShares DB US Dollar Index Bullish ETF (UUP)

Courtesy of MetaStock Xenith

Investors interested in buying the dollar versus a basket of currencies trade this ETF. It includes below long the dollar vs. Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

The weekly chart for the bullish dollar ETF ($23.93 on Sept. 22) is negative but oversold with the ETF below its five-week modified moving average of $24.08. The ETF is below its 200-week simple moving average or the “reversion to the mean” of $24.28, last tested during the week of Aug. 18 when the average was $24.23. The 12x3x3 weekly slow stochastic reading rose to 10.47 last week up from 9.88 on Sept. 15, still well below the oversold threshold of 20.00.

Investment Strategy: Buy weakness to my annual value level of $22.89. Sell strength to my semiannual risky level of $25.86.

The 11 Sector Exchange-Traded Funds

The technology sector ETF remains the outperformer year to date with a gain of 21% year to date and in bull market territory 27.8% above its post-election low. The weekly chart remains positive but overbought, and set a new all-time intraday high on Sept. 19.

In second place, but slipping is the healthcare sector ETF up 18.3% year to date and in bull market territory up 20.6% 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 28.5%, but its weekly chart is still neutral. 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 remains the energy sector ETF, down 10.8% year to date and deep into correction market territory down 14.3% 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 Sept. 20 and Sept. 22, respectively.

The retail ETFs, consumer discretionary and consumer staples ended last week with negative weekly charts, 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 ($91.86 on Sept. 22) has a neutral 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 $89.15, last tested during the week of Feb. 12, 2016 when the average was $81.06. The 12x3x3 weekly slow stochastic reading rose to 63.79 last week up from 62.06 on Sept. 15.

Investment Strategy: Buy weakness to my monthly value level of $89.06. Sell strength to my weekly risky level of $93.12.

Materials Sector SPDR Fund (XLB)

Courtesy of MetaStock Xenith

The weekly chart for the Materials Sector ETF ($56.55 on Sept. 22) is positive with the ETF above its five-week modified moving average of $55.20. The 200-week simple moving average is the “reversion to the mean” at $48.28, last tested during the week of July 1, 2016 when the average was $44.51. The 12x3x3 weekly slow stochastic reading rose to 69.10 last week up from 63.72 on Sept. 15.

Investment Strategy: Buy weakness to my weekly value level of $54.48. My semiannual pivot is $55.26. Sell strength to my monthly risky level of $57.27. 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 ($70.75 on Sept. 22) is positive with the ETF above its five-week modified moving average of $68.84. The 200-week simple moving average is the “reversion to the mean” at $56.99, last tested during the week of Jan. 22, 2016 when the average was $47.92. The 12x3x3 weekly slow stochastic reading rose to 61.76 this week up from 52.40 on Sept. 15.

Investment Strategy: Buy weakness to my weekly value level of $67.97. My semiannual and annual pivots are $69.69 and $70.05, respectively. Sell strength to my monthly risky level of $71.45.

Consumer Discretionary Select Sector SPDR Fund (XLY)

The weekly chart for the Consumer Discretionary Sector ETF ($89.54 on Sept. 22) is negative with the ETF below its five-week modified moving average of $89.61. The 200-week simple moving average is the “reversion to the mean” at $76.47. The 12x3x3 weekly slow stochastic reading is slipped to 34.06 last week down from 34.59 on Sept. 15.

Investment Strategy: Buy weakness to my weekly and quarterly value levels of $88.35 and $87.57, respectively. Sell strength to my annual and semiannual risky levels of $97.00 and $97.38, respectively.

Consumer Staples Select Sector SPDR Fund (XLP)

The weekly chart for the Consumer Staples Sector ETF ($53.92 on Sept. 22) is negative with the ETF below its five-week modified moving average of $54.86. The 200-week simple moving average is the ‘reversion to the mean” at $49.73. The 12x3x3 weekly slow stochastic reading slipped to 39.33 last week down from 39.42 on Sept. 15.

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

Energy Select Sector SPDR Fund (XLE)

Courtesy of MetaStock Xenith

The weekly chart for the Energy Sector ETF ($67.20 on Sept. 22) is positive with the ETF above its five-week modified moving average of $65.12. This ETF is below its 200-week simple moving average, or “reversion to the mean” of $75.02 last tested during the week of Dec. 16, when the average was $77.65. The 12x3x3 weekly slow stochastic reading rose to 47.95 last week up from 35.05 on Sept. 15.

Investment Strategy: Buy weakness to my weekly, monthly and quarterly value levels of $64.01, $59.11 and $57.58, respectively. Sell strength to my semiannual risky level of $70.39.

Financial Select Sector SPDR Fund (XLF)

The weekly chart for the Financial Sector ETF ($25.43 on Sept. 22) remains neutral with the ETF above its five-week modified moving average of $24.79. The 200-week simple moving average is the “reversion to the mean” at $20.05, last tested during the week of July 1, 2016 when the average was $17.58. The 12x3x3 weekly slow stochastic reading slipped to 54.89 last week down from 55.21 on Sept. 15.

Investment Strategy: Buy weakness to my semiannual and annual pivots at $24.55 and $23.65, respectively. Sell strength to my quarterly risky level of $26.00. Note that this ETF is below its June 2007 high of $30.83.

Utilities Select Sector SPDR Fund (XLU)

Covered in the “Flight to Safety” Section

Health Care Select Sector SPDR Fund (XLV)

The weekly chart for the Health Care Sector ETF ($81.58 on Sept. 22) is positive with the ETF above its five-week modified moving average of $80.71. The 200-week simple moving average is the “reversion to the mean” at $69.24. The 12x3x3 weekly slow stochastic reading rose to 78.86 last week up from 76.67 on Sept. 15.

Investment Strategy: Buy weakness to my annual value level of $78.09. Sell strength to my monthly and semiannual risky levels of $85.10 and $87.40, respectively.

Technology Select Sector SPDR Fund (XLK)

The weekly chart for the Technology Sector ETF ($58.52 on Sept. 22) is positive but overbought with the ETF above its five-week modified moving average of $57.86. The 200-week simple moving average is the “reversion to the mean” at $43.99, last tested during the flash crash of Aug. 24, 2015 when the average was $34.22. The 12x3x3 weekly slow stochastic reading rose to 83.97 last week moving further above the overbought threshold of 80.00.

Investment Strategy: Buy weakness to my semiannual and annual value levels of $55.95 and $55.49, respectively. Sell strength to my monthly risky level of $61.90.

iShares Transportation Average ETF (IYT)

Covered in the Equity Averages Section

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.

Comments

Traders Club

FEATURED
COMMUNITY