Stocks Make the Baseball Playoffs Interesting – Sector Review

• Posted by Greg Harmon
• on October 9th, 2011

Now that the baseball season has officially ended, since there are no longer any East or West Coast teams involved in the Playoffs, it is time to move on to Football, full-time and the start of Hockey Season. What is that you say? There are still three weeks of action packed League Championship Series and then the World Series. Technically you are right, but since nobody but a few people who really only read about the results on-line care, does it really matter? I don’t think so. That could be because my Indians beat everyone to be the first team to collapse in late August. Many fans of sports suggest that manufacturing an interest via gambling can help to keep your attention. I am not an advocate of gambling but if you want a reason to care, let me tie the rest of the playoffs to something you do care about, the stock market. The Select Sector SPDR ETF’s segment into groups again this week. Each has different odds of moving higher. I can’t calculate them directly but lets use the odds of winning the World Series for the remaining playoff teams for comparison.

Milwaukee Brewers 2.30:1

The favorite to win it all, the Milwaukee Brewers are like the Utilities Select Sector SPDR, $XLU. This sector has the best chance of continuing higher. The weekly chart below shows that it has remained near its highs with a Relative Strength Index (RSI) that has remained in bullish territory and all of the Simple Moving Averages (SMA) are rising except the 200 week SMA. This is the

Utilities Select Sector SPDR, $XLU

only sector that can talk that kind of trash. Respect. This probably has something to do with why Prince Fielder thinks he can sport the weird facial hair and be about 100 lbs overweight. It is showing some signs of tiring the last 3 weeks with a long legged doji, doji, and Hanging Man series of candles, but hey it has been a long season right?

Texas Rangers 2.40:1

The close second choice to win the World Series, the Texas Rangers, are most like the Technology Select Sector SPDR, $XLK and Consumer Staples Select Sector SPDR, $XLP. These sectors, as illustrated by the $XLK below, are trying to pull up out of their bear flags. The The RSI is bumping against the mid line and the MACD is improving towards the zero line. The chance of a move higher

Technology Select Sector SPDR, $XLK

looks mixed as the shorter SMA’s are starting to roll lower, but price is still relatively strong compared to the long runs higher from March 2009, and could arguably be described as long bull flags at the end of that run. A fall below the latest 9 week portion of that flag would be a sign of worry for a move lower. Time will tell if they roll on or like the C.J. Wilson stumble in the Division Series, falter.

St. Louis Cardinals 3.15:1

There are 3 sectors that like the Cardinals have a shot at it but it looks less likely. These are the Industrials Select Sector SPDR, $XLI, Health Care Select Sector SPDR, $XLV and Consumer Discretionary Select Sector SPDR, $XLY. From the chart of the $XLV below, the RSI has come off of the bottom but has failed to make it back into bullish territory as last week’s candle tested lower

Health Care Select Sector SPDR, $XLV

out of the bear flag for the second time. unlike the group above, similar to the Rangers, these could not by any stretch be confused with a long term bull flag. But the MACD is improving. Watch for the RSI to get over 60 as a sign of strength but it looks like it might take another Chris Carpenter gem to confirm last weeks Hammer and get them bullish above the flag.

Detroit Tigers 3.60:1

Two sectors, the Materials Select Sector SPDR, $XLB and Energy Select Sector SPDR, $XLE are limping along, beaten up and trying to stop the downward momentum, like the Detroit Tigers. Yes they are playing in the League Championship Series but Delmon Young is hurt and they do not have the perennial playoff flopper A-Rod against them to help this time. From the chart of the $XLE below it is in a downtrend too, but has some signs of strength. It did bounce higher off of the

Energy Select Sector SPDR, $XLE

downtrend support and printed a Hammer candle, a potential reversal. And the Tigers have some positive signs as well, but Justin Verlander can only pitch two, maybe 3 of the games, not enough to win a best of 7 series. It will take a group effort overcoming the damage to the chart and team to move forward and higher. Until those signs are present they are just leaking lower.

Waiting for Next Year

Speaking of A-Rod, there is one sector like all the other team, that will have to wait until next year. The Financials Select Sector SPDR, $XLF has been moving sideways in a range since the last time the Yankees won the World Series in 2009. And like the Yankees may now be be fading. What with Jeter and Posada aging and A-Rod continuing to fail in the clutch, it may be time for a rebuilding. And the chart of the $XLF below shows the recent bear flag starting to leak lower. The RSI is

Financials Select Sector SPDR, $XLF

sticking to the 30 level and although the MACD is improving it is doing so very slowly. But the Yankees always have a lot of money to spend and may just be able to plug the gaps quickly. The $XLF shows signs of that potential as well printing an Inverted Hammer and then a long Legged Doji the last two weeks, potential reversal candles if confirmed. There is a lot to overcome for now.

For the moment stick with the Milwaukee Brewers and Texas Rangers of stocks, with an eye on the St. Louis Cardinals and Detroit Tigers, but avoiding the Yankees.

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