Utilities Lead, Finance Lags, but Check These Charts Before You Buy or Sell
Quarter-end and mid-year window-dressing pulled the weekly charts to neutral from negative last week for four sector exchange-traded funds that had negative weekly charts. This helped the S&P 500 I:GSPC to shift from negative to neutral on its weekly chart.
The utilities sector ETF is by far the year-to-day leader, with a gain of 21.3%. This ETF is now overbought after setting an all-time high of $52.53 on June 30. Investors should be aware that its dividend yield is no longer compelling.
The finance sector ETF is by far the year-to-date laggard, with a loss of 4.6%. Investors should be aware that the 24 largest FDIC-insured financial institutions are components of the KBW regional bank index. That index is in bear market territory, 20.6% below its multiyear high, set on July 23, 2015.
In my opinion, you cannot have a bull market for stocks with a bear market in the major U.S. banks.
Six sector ETFs have neutral weekly charts: industrials, consumer discretionary, consumer staples, energy, health care and technology.
That leaves two sector ETFs with negative weekly charts: materials and transportation.
Here is this week's scorecard for the 10 exchange-traded funds that represent each of the sectors of the S&P 500. The charts that follow are courtesy of MetaStock Xenith.
The weekly chart for the Materials Select Sector SPDR Fund (XLB) - Get Report remains negative, with the ETF below its key weekly moving average of $46.54 and above its 200-week simple moving average of $44.51. The weekly momentum reading ended last week at 68.82, down from 76.08 on June 24.
Investors looking to buy the materials ETF should do so on weakness to $43.89 and $42.84, which are key levels on technical charts until the end of July and September, respectively. Beware that the downside risk is to $35.37 by the end of 2016.
Investors looking to reduce holdings should consider selling strength to $47.64, which is a key level on technical charts until the end of this week.
The weekly chart for the Industrial Select Sector SPDR Fund (XLI) - Get Report is neutral, with the ETF above its key weekly moving average of $55.56 and above its 200-week simple moving average of $50.06.
The weekly momentum reading declined to 54.97 last week, down from 60.51 on June 24.
Investors looking to buy the industrials ETF should do so on weakness to $44.71 and $43.64, which are key levels on technical charts until the end of 2016.
Key levels of $54.82 and $54.49 were crossed last week and should be magnets until the end of September and the end of July, respectively.
Investors looking to reduce holdings should do so on strength to $58.23, which is the ETF's 52-week high.
The weekly chart for the Consumer Discretionary Select Sector SPDR Fund (XLY) - Get Report is neutral, with the ETF above its key weekly moving average of $78.14, and above its 200-week simple moving average of $66.48. The weekly momentum reading declined to 46.37 last week, down from 51.13 on June 24.
Investors looking to buy the consumer discretionary ETF should do so on weakness to $74.84 and $71.86, which are key levels on technical charts until the end of July and the end of 2016, respectively.
Investors looking to reduce holdings should consider selling strength to $81.90, which is the ETF's 52-week high.
The weekly chart for the Consumer Staples Select Sector SPDR Fund (XLP) - Get Report remains neutral, with the ETF above its key weekly moving average of $53.50 and above its 200-week simple moving average of $44.88. The weekly momentum reading slipped to 74.36 this week, down from 74.85 on June 24. Note that the chart is not positive even though the ETF set a new high of $55.15 on June 30.
Investors looking to buy the consumer staples ETF should do so on weakness to $46.64, which is a key level on technical charts until the end of 2016.
The $54.54 level should be a magnet during July.
Investors looking to reduce holdings should consider selling strength to $55.60 and $58.35, which are key levels on technical charts until the end of September and the end of 2016, respectively.
The weekly chart for the Energy Select Sector SPDR Fund (XLE) - Get Report remains neutral, with the ETF above its key weekly moving average of $66.62 and well below its 200-week simple moving average of $78.05. The weekly momentum reading fell to 72.73 last week, down from 73.54 on June 24.
Investors looking to buy the energy ETF should do so on weakness to $59.95 and $54.40, which are key levels on technical charts until the end of July and the end of 2016, respectively.
Investors looking to reduce holdings should consider selling strength to $69.83, which is a key level on technical charts until the end of this week.
The weekly chart for the Financial Select Sector SPDR Fund (XLF) - Get Report remains negative, with the ETF below its key weekly moving average of $22.84 and above its 200-week simple moving average of $21.65. The weekly momentum reading ended last week at 52.66, down from 61.99 on June 24.
Investors looking to buy the finance ETF should do so on weakness to $21.80, which is a key level on technical charts until the end of July.
Investors looking to reduce holdings should consider selling strength to $24.17, which is a key level on technical charts until the end of September.
The weekly chart for the Health Care Select Sector SPDR Fund (XLV) - Get Report is neutral, with the ETF above its key weekly moving average of $70.59 and above its 200-week simple moving average of $60.17. The weekly momentum reading ended last week at 64.25 down from 69.53 on June 24.
Investors looking to buy the health care ETF should do so on weakness to $68.25 and $60.59, which are key levels on technical charts until the end of July and the end of 2016, respectively.
Investors looking to reduce holdings should consider selling strength to $77.40, which is the 52-week high.
The weekly chart for the Utilities Select Sector SPDR Fund (XLU) - Get Report remains positive but overbought, with the ETF above its key weekly moving average of $50.23 and well above its 200-week simple moving average of $41.89. The weekly momentum reading rose to 88.37 last week, up from 85.96 on June 24, becoming more overbought above the 80.00 threshold.
Investors looking to buy the utilities ETF should do so on weakness to $48.26, which is a key level on technical charts until the end of September.
Prices of $51.79 and $50.05 should be magnets for July and the remainder of 2016, respectively.
Investors looking to reduce holdings should do so above these pivots.
The weekly chart for the Technology Select Sector SPDR Fund (XLK) - Get Report is neutral, with the ETF above its key weekly moving average of $43.17 and above its 200-week simple moving average of $37.35. The weekly momentum reading declined to 53.31 last week, down from 58.97 on June 24.
Investors looking to buy the technology ETF should do so on weakness to $35.69, which is a key level on technical charts until the end of 2016.
The $42.22 level should be a magnet through July.
Investors looking to reduce holdings should consider selling strength to $45.54 and $48.13, which are key levels on technical charts until the end of September and the end of 2016, respectively.
The weekly chart for the Shares Transportation Average ETF (IYT) - Get Report remains negative. The ETF is below its key weekly moving average of $136.75 and just above its 200-week simple moving average of $132.69. The weekly momentum reading declined to 33.90 last week, down from 38.77 on June 24.
Investors looking to buy the transportation ETF should do so on weakness to $126.82 and $123.82, which are key levels on technical charts until the end of July and the end of 2016, respectively.
The $136.24 level should remain a magnet through the end of the year.
Investors looking to reduce holdings should consider selling strength to $142.30, which is a key level on technical charts until the end of September.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.