If You’re Not Pretty Stand Next to Ugly People: Sector Review Part 2 – Daily

The daily SPDR sector charts break out a bit differently than the weekly charts analyzed earlier (link below). There are really just two camps: the Ugly and the Not Pretty. The difference between them is that the Not Pretty can do things to look outwardly better. They can add accessories or fancy clothes, or stand next to the Ugly’s to get a better comparison. The Ugly’s need to rely on the all the Not Pretty’s looking good before they can get any positive affection. So which sectors are which? Lets take a look and why.

The Ugly’s

This group contains 4 brothers Technology Select Sector SPDR,$XLK, Consumer Staples Select Sector SPDR,$XLP, Utilities Select Sector SPDR,$XLU and Consumer Discretionary Select Sector SPDR,$XLY. No doubts about it, the only way to describe the charts of these sectors is ugly. Examine the chart of XLY below.
Consumer Discretionary Select Sector SPDR,$XLY

XLY shows a classic bear flag sitting on support of the 100 day Simple Moving Average (SMA). This is the best of the bunch as it is the only sibling that has not broken through the 100 day SMA. But like its brothers, it is below the 20 and 50 day SMA’s. The Relative Strength Index (RSI) is below the mid line and falling but still has lots of room before it gets near being technically oversold. Only the XLK has even touched the 30 level. The Moving Average Convergence Divergence (MACD) indicator is bearishly growing more negative and the Bollinger bands are expanding to facilitate further downside. XLY is the exception when looking at volume. With a large spike in volume Friday perhaps it is trying to break from its brothers who have textbook declining volume as the flag is developing. These are the worst looking sectors over the next few days.

The Not Pretty’s

Better, but only by comparison, are the Materials Select Sector SPDR,$XLB, Energy Select Sector SPDR,$XLE, Financials Select Sector SPDR,$XLF, Industrials Select Sector SPDR,$XLI and Health Care Select Sector SPDR,$XLV. These sectors were in bear flags but have dressed them up a bit. Look at the chart of XLB below to understand.
Materials Select Sector SPDR,$XLB

XLB tried to pull up out of the bear flag on Friday, and although it closed higher it printed a bearish Solid Black Candle (more in link below). XLE was the only one in this group not to print a Solid Black candle and that was because it had a lower close, making a red candle. The RSI has leveled and may be reversing and the MACD has leveled and is improving. Maybe they are turning around. Wait a minute get those Ugly brothers away so I can see clearly. Notice that the 20 day Simple Moving Average (SMA) has rolled over and crossed bearishly through the 50 day SMA. The 20 day SMA is falling for all the others and only the XLE and XLV have not yet crossed the 50 SMA. So clearly these sectors are not out looking good just yet. But in comparison these are where to focus the next week.

Given the choice between Ugly People and Not Pretty people, the choice is easy to make about who to hang out with for the next few days. Use that same decision making process in the market for the next few days. But understand you are making a short term decision. No need to get to know their personality, only looks matter.

The Tide is Rising: Sector Review Part 1 – Weekly

The Opposite of Solid Black Candles: Hollow Red Candles

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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