The Winners and Losers on the Battlefield

• Posted by Greg Harmon
• on January 8th, 2011

There were clear winners and losers of the battle once again this week when looking at the SPDR sectors. Sectors where everyone can easily see the trend. Then there were the rest of the sectors still battling it out on the front lines.

Winners…..

Industrials Select Sector SPDR, XLI, Technology Select Sector SPDR, XLK, and Health Care Select Sector SPDR, XLV all look strong. They have space above their respective 20 day SMA’s, high levels of Relative Strength Index (RSI) and their Moving Average Convergence Divergence (MACD) indicators have all crossed higher or are about to, a very bullish sign. These were the winners and look to continue going forward. Below is the chart for the XLV for illustration.

Health Care Select Sector SPDR, XLV

…..and Losers

Materials Select Sector SPDR, XLB, and Consumer Staples Select Sector SPDR, XLP look weak. They have declining price trends and falling RSI. Their MACD has crossed downward and they either have failed to hold the 20 day SMA or about to test it. Look at the chart of the XLP below.

Battlefield Strategy

There are clear trade ideas that can be had be pairing the winners long against the losers short. The best of which looks to be long the XLI against short the XLP. Below is a weekly ratio chart of the pair.

This looks to have just broken out of a bull flag and through the 200 week SMA and is heading higher. Based on a measured moved from the 1.12 level to the 1.19 flag, a good target would be at least 1.26, about 4% higher.

Up next, the Front Lines.

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

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