Hey Wait! Mom Got Chunky Peanut Butter – Sector Review

Gap down potential reversal Hammer Monday, confirmed Tuesday, gap higher Wednesday and confirmed the gap up on Thursday but with intraday bearishness.

From a distance no matter where you look the market seems the same. Like peanut butter spread evenly on a piece of bread. Whether you are tracking the broad market, or the SPDR sector ETF’s this is what you saw last week. Looking at weekly charts the broad market looks ready to move higher and so does every sector. But despite this homogenous look and feel there are some interesting situations that show up when examining the details of the daily SPDR sector ETF charts. There are chunks in the peanut butter. Let me point out 5.

Tuckered Out

If you had to pick one sector as having the worst prospects for the coming week it would be the Consumer Staples Select Sector SPDR,$XLP. This sector has been the market leader for the last few weeks rising almost straight up.
Consumer Staples Select Sector SPDR,$XLP

The chart above shows that XLP is showing some signs that it may slow down or pullback soon though. Despite rising Simple Moving Averages (SMA) the Relative Strength Index (RSI) is technically overbought and moving sideways and the Moving Average Convergence Divergence (MACD) has been waning the last two weeks. Also the volume had been increasing on the run higher in early April but has reversed and is decreasing on the last leg higher. It may be time for XLP to pass the baton to another sector.

Relative Strength

Three sectors showed relative strength the past week moving up and closing just outside of their Bollinger bands on Thursday. These were the Technology Select Sector SPDR,$XLK, Health Care Select Sector SPDR,$XLV and Consumer Discretionary Select Sector SPDR,$XLY. All three have an RSI that shot up steeply as illustrated in the XLK chart below. Also note the MACD crossing positive and move above the 20 and 50 day SMA’s this week. XLY is identical, with XLV, having started from a better place, increasing its MACD and the extension from the 20 and 50 day SMA’s. Being outside of the Bollinger bands can be a sign of short term exhaustion but notice that the have been squeezed and are now expanding as the price moves higher. If there is confirmation of any exhaustion look for it to be sideways consolidation for a very short time before a move higher.

Technology Select Sector SPDR,$XLK

Former Leaders

Three former leaders are now firmly in the middle of the pack, These are the Materials Select Sector SPDR,$XLB, Energy Select Sector SPDR,$XLE and Industrials Select Sector SPDR,$XLI. This is not to say that they are going to be lagging or falling off but rather that they now look to be following others. They all have upward sloping SMA and RSI and MACD’s that are about to cross positive. Not a bad place to play but then the whole market looks like this. The best of these, XLB, may reassert itself for leadership after a strong follow up move higher Friday printing a candle with no upper shadow, closing on the high. Watch is for signs of leadership change.

The Enigma

The Financials Select Sector SPDR,$XLF continues to be an enigma. What does it take for the financials to move? It is the one sector that is the exception to the past weeks analysis that started the article.

Financials Select Sector SPDR,$XLF

After printing the Hammer Monday it followed with 3 consecutive Solid Black candles that barely closed the gap. These signify intraday weakness, closing lower than they open, despite finishing higher than the previous day. Think about what that means for a minute. After a big gap down day, the following 3 days saw sellers takeover as it moved slightly higher. Despite having a rising RSI and improving MACD that does not seem bullish to me.

Stuck In the Middle

Finally there is the Utilities Select Sector SPDR,$XLU. This sector is a between the tuckered out XLP and those sectors showing relative strength and the former leaders. It still has room to the top of the Bollinger bands and has already had a MACD cross a week ago, but the RSI is flat and volume is falling off as it is hitting resistance. Perhaps this sector will be a continued tell for where the market is headed. As a laggard the market has moved higher, as a leader the market has consolidated. Keep an eye on it.

Utilities Select Sector SPDR,$XLU

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