I Hate Sauerkraut! – Sector Review

• Posted by Greg Harmon
• on May 30th, 2011

I know some people love it and I have probably offended a lot of readers already. Well too bad. It is the worst part of a hotdog, Italian sausage or bratwurst you get either at a game, festival or a family barbeque. Don’t get me wrong, I can do without a bun also, but the bun can be useful to hold the juices and any additional items you might add like onions or peppers, sauces like ketchup, hot sauce or mustard. In the end the bun is okay but I could just eat the Bratwurst plain. It is the star. I do enjoy the whole package, but it is the Brat that steals the show. This is how I see the SPDR sectors this week as well. All of them together paint a pretty good picture but there are Brats, Buns and Sauerkraut.

The Brats

Two sectors are the superstar Brats this week. They are the Materials Select Sector SPDR,$XLB and the Energy Select Sector SPDR,$XLE. These two sectors have a couple of aspects that put them ahead of the rest of the sector funds. Look at the chart of XLB below as an example.

Materials Select Sector SPDR,$XLB

It found a bottom Monday and rose through the week. By week’s end it was testing the 50 day Simple Moving Average (SMA) after rising through the 20 and 100 day SMA’s, and making a higher high. It also has a rising Relative Strength Index (RSI) that has moved back up through the mid line and a Moving Average Convergence Divergence (MACD) indicator that is crossing bullishly into positive territory. If it can get through the 50 day SMA then a retest of the May 1 highs is in order. The chart for XLE is identical except that it’s MACD crossed positive a day earlier. These are the leaders again. The Bratwurst at your Memorial Day barbeque. Savor them.

The Buns

Four sectors fit in to this group. And isn’t that appropriate because you always need to buy more buns then you have Brats. What is up with that? The Financials Select Sector SPDR,$XLF, Industrials Select Sector SPDR,$XLI, Technology Select Sector SPDR,$XLK and Consumer Discretionary Select Sector SPDR,$
XLY all look like Buns to me. They have some value but I would prefer the Brats. Each has its own quirks but look at the chart of the XLF as an example. The XLF is rising off of a bottom but

Financials Select Sector SPDR,$XLF

it still has to get through the 20, 50 and 100 day SMA as resistance. It does have a rising RSI and the MACD is improving but still far from crossing up. The XLI and XLK also have good looking RSI, and all four have improving MACD, but all four also finished the week barely closing the gap down from Monday. Watch this group to see if maybe they get used for hamburgers as well giving them a push of left to go stale.

The Sauerkraut

The remaining three sectors, Consumer Staples Select Sector SPDR,$XLP, Utilities Select Sector SPDR,$XLU and Health Care Select Sector SPDR,$XLV look like Sauerkraut to me. Using the XLP chart to illustrate, the fall has not been that bad, only just

Consumer Staples Select Sector SPDR,$XLP

under the 20 day SMA. But these sectors did not end the fall on Monday and they did not come near fully recovering. Other than the XLP the charts look like bear flags. The RSI seems to be moving higher but the MACD is still negative and although flat for the XLP growing more negative for the XLV and XLU. These recent leaders have some work to do to get back on track. Until they do you can leave them alone like Sauerkraut, or look for them to lead if the market turns south.

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

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus