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Beware Of Key Reversals On Energy And Financial ETFs

Each of the 11 sectors of the S&P 500 has its own ETF and 1 is rated Underweight, 2 Equal-Weight and 8 Overweight.

The technology sector is now the leader up 9.1% year to date followed by consumer discretionary up 7.5%. The biggest loser is consumer staples down 12.3% year to date. REITs are down 4.6% and utilities are down 4.1%. All other sectors are between down 2.5% and up 3.2% year-to-date.

Establishing weightings based up their weekly charts is the backbone of an Asset Allocation Model.

· An Underweight Sector Has A Negative Weekly Chart. A negative weekly chart shows the ETF below its five-week modified moving average with declining or oversold weekly momentum (12x3x3 weekly slow stochastic).

· An Equal-Weight Sector Has A Neutral Weekly Chart. A neutral weekly chart shows the ETF below its five-week modified moving average with rising weekly momentum, or above its five-week modified moving average with declining weekly momentum.

· An Overweight Sector Has A Positive Weekly Chart. A positive weekly chart shows the ETF above its five-week modified moving average with rising or overbought weekly momentum.

SPDR Dow Jones REIT ETF (RWR) – Overweight

My monthly and quarterly pivots are $86.09 and $90.16, respectively. Reduce holdings on strength to its 200-week simple moving average at $91.15.

Materials Sector SPDR Fund (XLB) – Overweight

Buy weakness to my semiannual value level of $56.21 and reduce holdings on strength to my quarterly and monthly risky levels of $62.13 and $62.58, respectively. My annual pivot of $59.99 was exceeded at last week’s high.

Industrial Select Sector SPDR Fund (XLI) – Overweight

Buy weakness to my semiannual value level of $71.16 which was tested during the week of May 4 and reduce holdings on strength to my quarterly and annual risky levels of $78.98 and $79.31, respectively.

Consumer Discretionary Select Sector SPDR Fund (XLY) – Overweight

Buy weakness to my quarterly and semiannual value levels of $100.55 and $97.61, respectively. My semiannual level was tested during the week of April 5. Reduce holdings on strength to my annual and monthly risky levels of $107.96 and $109.89, respectively. My annual level was tested during the week of Jan. 26.

Consumer Staples Select Sector SPDR Fund (XLP) – Underweight

I do not show any value levels. Reduce holdings on strength to my monthly, quarterly, semiannual and annual risky levels of $53.02, $54.88, $60.75 and $63.34, respectively.

Energy Select Sector SPDR Fund (XLE) – Overweight

Buy weakness to the 200-week simple moving average of $71.47 last tested during the week of April 20. My semiannual value level lags at $59.88. My quarterly and monthly pivots are $76.90 and $78.00, respectively, with my annual risky level of $88.91. Last week provided another opportunity to reduce holdings at $78.00. Last week was a ‘key reversal’ which occurs when the weekly close was below the prior week’s low after setting a new high.

Financial Select Sector SPDR Fund (XLF) – Equal-Weight

Buy weakness to my semiannual and annual pivots are $26.69 and $26.77, respectively. This was doable during the week of May 4. Reduce holdings on strength to my quarterly and monthly risky levels of $30.27 and $30.63, respectively. The June 2007 high was $30.83. Last week was an outside week to the downside which occurs when the weekly close was below the prior week’s low after setting a higher high.

Utilities Select Sector SPDR Fund (XLU) – Equal-Weight

Buy weakness to my 200-week simple moving average at $48.12 which was tested during the week of Feb. 9 when this average was $47.56. Reduce holdings on strength to my quarterly, annual and semiannual risky levels of $52.62, $54.46 and $58.60, respectively.

Health Care Select Sector SPDR Fund (XLV) – Overweight

Buy weakness to my weekly value level of $78.06 and reduce holdings on strength to my monthly, quarterly, annual and semiannual risky levels of $84.74, $86.35, $88.09 and $91.42, respectively. My semiannual risky level was tested during the week of Jan. 26.

Technology Select Sector SPDR Fund (XLK) – Overweight

Buy weakness to my semiannual and annual value levels of $61.66 and $60.55, respectively, and reduce holdings on strength to my monthly risky level of $70.68. My quarterly pivot is $67.07.

iShares Transportation Average ETF (IYT) – Overweight

Buy weakness to my semiannual pivot at $188.79. My quarterly pivot is $195.90. Reduce holdings on strength to my annual risky level of $204.61. My semiannual pivot has been a magnet since the week of Feb. 9.

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