Mojo Returns To The 11 Sector ETFs As 4 Set New All-Time Highs

The S&P 500 is divided into 11 sectors and each sector can be traded using its own exchange-traded fund.

The technology sector ETF remains the outperformer year to date with a gain of 21.8% year to date and in bull market territory 28.6% above its post-election low. The weekly chart is positive but overbought, and set a new all-time intraday high on Sept. 8.

In second place is the healthcare sector ETF up 20.5% year to date and in bull market territory up 22.8% 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 remains in second place since the election with a bull market gain of 25.6%, with its weekly chart 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 is still the energy sector ETF, down 12.1% year to date and deep into correction market territory down 15.6% since its post-election high of $78.45 set on Dec. 12. Its weekly chart is now positive.

SPDR Dow Jones REIT ETF (RWR)

The weekly chart for the REIT Sector ETF ($93.72 on Sept. 13) has a positive weekly chart with the ETF above its five-week modified moving average of $93.20. The 200-week simple moving average is the “reversion to the mean” at $89.05, last tested during the week of Feb. 12, 2016 when the average was $81.06. The 12x3x3 weekly slow stochastic reading is projected to rise to 61.42 this week up from 54.89 on Sept. 8.

Investment Strategy: Buy weakness to my monthly value level of $92.62. Sell strength to my semiannual risky level of $97.61.

Materials Sector SPDR Fund (XLB)

Courtesy of MetaStock Xenith

The weekly chart for the Materials Sector ETF ($56.18 on Sept. 13) is positive with the ETF above its five-week modified moving average of $54.88. The 200-week simple moving average is the “reversion to the mean” at $48.23, last tested during the week of July 1, 2016 when the average was $44.51. The 12x3x3 weekly slow stochastic reading is projected to rise to 64.34 this week up from 56.84 on Sept. 8.

Investment Strategy: Buy weakness to my quarterly value level of $47.60. 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)

The weekly chart for the Industrial Sector ETF ($69.09 on Sept. 13) is positive with the ETF above its five-week modified moving average of $68.30. The 200-week simple moving average is the “reversion to the mean” at $56.89, last tested during the week of Jan. 22, 2016 when the average was $47.92. The 12x3x3 weekly slow stochastic reading is projected to rise to 51.14 this week up from 44.76 on Sept. 8.

Investment Strategy: Buy weakness to my quarterly value level of $65.11. Sell strength to my semiannual, monthly and annual risky levels of $69.69, $71.45 and $70.05, respectively.

Consumer Discretionary Select Sector SPDR Fund (XLY)

The weekly chart for the Consumer Discretionary Sector ETF ($90.69 on Sept. 13) is positive with the ETF above its five-week modified moving average of $89.83. The 200-week simple moving average is the “reversion to the mean” at $76.36. The 12x3x3 weekly slow stochastic reading is projected to rise to 36.92 this week up from 32.99 on Sept. 8.

Investment Strategy: Buy weakness to my quarterly value level of $87.57. Sell strength to my monthly, annual and semiannual risky levels of $96.50, $97.00 and $97.38, respectively.

Consumer Staples Select Sector SPDR Fund (XLP)

The weekly chart for the Consumer Staples Sector ETF ($55.58 on Sept. 13) is positive with the ETF above its five-week modified moving average of $55.17. The 200-week simple moving average is the ‘reversion to the mean” at $49.68. The 12x3x3 weekly slow stochastic reading is projected to rise to 41.14 this week up from 34.04 on Sept. 8.

Investment Strategy: Buy weakness to my annual value level of $46.91. Sell strength to my semiannual, monthly and annual risky levels of $57.86, $58.02 and $58.03, respectively.

Energy Select Sector SPDR Fund (XLE)

Courtesy of MetaStock Xenith

The weekly chart for the Energy Sector ETF ($66.23 on Sept. 13) is positive with the ETF above its five-week modified moving average of $64.67. This ETF is below its 200-week simple moving average, or “reversion to the mean” of $75.13 last tested during the week of Dec. 16, when the average was $77.65. The 12x3x3 weekly slow stochastic reading is projected to rise to 35.86 this week up from 26.63 on Sept. 8.

Investment Strategy: Buy weakness to my monthly and quarterly value levels of $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 ($24.85 on Sept. 13) remains neutral with the ETF just above its five-week modified moving average of $24.65. The 200-week simple moving average is the “reversion to the mean” at $20.01, last tested during the week of July 1, 2016 when the average was $17.58. The 12x3x3 weekly slow stochastic reading slipped to 55.70 last week down from 61.88 on Sept. 8.

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 monthly risky level of $25.09. Note that this ETF is below its June 2007 high of $30.83.

Utilities Select Sector SPDR Fund (XLU)

The weekly chart for the Utilities Sector ETF ($54.63 on Sept. 13) has a positive but overbought weekly chart with the ETF above its five-week modified moving average of $54.30. The 200-week simple moving average is the “reversion to the mean” at $46.08. The 12x3x3 weekly slow stochastic reading is projected to rise to 84.18 this week above the overbought threshold of 80.00.

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

Health Care Select Sector SPDR Fund (XLV)

Courtesy of MetaStock Xenith

The weekly chart for the Health Care Sector ETF ($83.05 on Sept. 13) is positive with the ETF above its five-week modified moving average of $80.59. The 200-week simple moving average is the “reversion to the mean” at $69.11. The 12x3x3 weekly slow stochastic reading is projected to rise to 77.59 this week up from 69.21 on Sept. 8.

Investment Strategy: Buy weakness to my annual and quarterly value levels of $70.42 and $78.09, respectively. 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 ($58.91 on Sept. 13) is positive but overbought with the ETF above its five-week modified moving average of $57.73. The 200-week simple moving average is the “reversion to the mean” at $43.87, last tested during the flash crash of Aug. 24, 2015 when the average was $34.22. The 12x3x3 weekly slow stochastic reading is projected to rise to 83.27 moving above the overbought threshold of 80.00.

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 monthly risky level of $61.90.

iShares Transportation Average ETF (IYT)

The weekly chart for the Transportation Sector ETF ($171.98 on Sept. 13) is positive with the ETF above its five-week modified moving average of $168.50. The 200-week simple moving average is the “reversion to the mean” at $149.30, last tested during the week of July 8, 2016 when the average was $132.92. The 12x3x3 weekly slow stochastic reading is projected to rise to 42.54 this week up from 35.40 on Sept. 8.

Investment Strategy: Buy weakness to my quarterly value level of $158.89. My monthly pivot is $170.91. Sell strength to my semiannual and annual risky levels of $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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