Investing in Technology, Utilities Is the Preferred Barbell Strategy

The dynamics among the 11 S&P 500 sector exchange-traded funds clearly shows that technology remains the leader. The technology Sector ETF set its all-time intraday high of $55.83 on Monday. The tech sector's largest component Apple (AAPL) set an all-time intraday high of $156.65, also on Monday. 

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Like technology, the utilities ETF has a positive but overbought weekly chart, thanks to investors' quest for dividends. The momentum gains from technology combined with the "flight to safety" of dividend income, defines what's called a barbell investment portfolio.

The barbell strategy balances investors' portfolios by pairing risk of volatile stocks with the income security of dividend stocks.

The only other sector ETF with a positive but overbought weekly chart is consumer discretionary. Sector ETFs with positive weekly charts are materials, industrial, financials and health care. Sector ETFs with neutral weekly charts are consumer staples and transportation. The REIT ETF still has a negative weekly chart, while the energy ETF is on the cusp of an upgrade from a negative weekly chart.

When looking at the weekly charts below, keep an eye on the 200-week simple moving averages, shown in green. Investors should consider this level as the "reversion to the mean." This reversion is an investment theory that the price, or an index, stock or ETF, will eventually return to a longer-term simple moving average, and the 200-week is simple to track. A ticker trading above its "reversion to the mean" will eventually decline back to it on weakness. Similarly, a ticker trading below its "reversion to the mean" will eventually rebound to it on strength.

Scorecard For 11 Exchange-Traded funds
Scorecard For 11 Exchange-Traded funds

The technology ETF remains the big winner, with a gain of 15.5% year to date. In second place is consumer discretionary, with a gain of 10.4%. The energy sector is the biggest loser, down 9.3% year to date, and in correction territory 13% below its Dec. 12 high of $78.45. Only three of the 11 sectors are leading the year-to date gain of 7.3% for the S&P 500.

SPDR Dow Jones REIT ETF (RWR)
SPDR Dow Jones REIT ETF (RWR)

Courtesy of MetaStock Xenith

The weekly chart for the REIT Sector  (RWR)  ETF ($90.90 on May 15) will remain negative this week if the ETF ends below its key weekly moving average of $92.12. The 200-week simple moving average is the "reversion to the mean" at $87.46. Weekly momentum is projected to slip to 36.69 this week, down from 44.95 a week ago. Buy weakness to my quarterly value level of $90.33. Sell strength to my weekly risky level of $93.01. My monthly value level is $85.96, with a semiannual risky level of $101.09.

Materials Sector SPDR Fund (XLB)
Materials Sector SPDR Fund (XLB)

Courtesy of MetaStock Xenith

The weekly chart for the Materials Sector  (XLB) ETF ($53.07 on May 15) remains positive if the ETF ends the week above its key weekly moving average of $52.62. The 200-week simple moving average is the "reversion to the mean" at $47.20. Weekly momentum is projected to rise to 66.25 this week, up from 64.93 a week ago. Buy weakness to my quarterly value level of $45.70. My monthly and weekly pivots are $52.97 and $52.54, respectively. Sell strength to my semiannual risky level of $55.87.

Industrial Select Sector SPDR Fund (XLI)
Industrial Select Sector SPDR Fund (XLI)

Courtesy of MetaStock Xenith

The weekly chart for the Industrial Sector  (XLI) ETF ($66.52 on May 15) remains positive if the ETF ends the week above its key weekly moving average of $65.87. The 200-week simple moving average is the "reversion to the mean" at $55.05. Weekly momentum is projected to rise to 73.44 this week up from 69.89 a week ago. Buy weakness to my quarterly value level of $59.60. My weekly and monthly pivots are $65.43 and $67.45, respectively. Sell strength to my annual and semiannual risky levels of $70.05 and $71.67, respectively.

Consumer Discretionary Select Sector SPDR Fund (XLY)
Consumer Discretionary Select Sector SPDR Fund (XLY)

Courtesy of MetaStock Xenith

The weekly chart for the Consumer Discretionary Sector  (XLY) ETF ($89.90 on May 15) remains positive but overbought with the ETF above its key weekly moving average of $88.74. The 200-week simple moving average is the "reversion to the mean" at $73.87. Weekly momentum is projected to remain above the overbought threshold of 80.00 at 84.54 this week. Buy weakness to my quarterly and monthly value levels of $85.41 and $84.84, respectively. My weekly pivot is $89.65. Sell strength to my annual and semiannual risky levels of $97.00 and $98.70, respectively.

Consumer Staples Select Sector SPDR Fund (XLP)
Consumer Staples Select Sector SPDR Fund (XLP)

Courtesy of MetaStock Xenith

The weekly chart for the Consumer Staples Sector (XLP) ETF ($55.14 on May 15) will be downgraded to negative, given a weekly close this week below its key weekly moving average of $54.90. The 200-week simple moving average is the "reversion to the mean" at $48.46. Weekly momentum is projected to slip to 69.36 this week, down from 77.66 a week ago. Buy weakness to my monthly value level of $52.49. My quarterly and weekly pivots are $55.16 and $54.83, respectively. Sell strength to my annual and semiannual risky levels of $58.03 and $61.19, respectively.

Energy Select Sector SPDR Fund (XLE)
Energy Select Sector SPDR Fund (XLE)

Courtesy of MetaStock Xenith

The weekly chart for the Energy Sector (XLE) ETF ($68.28 on May 15) will remain negative but oversold if the ETF ends the week below its key weekly moving average of $68.71. This ETF is below its 200-week simple moving average, or "reversion to the mean" of $76.76. Weekly momentum is projected to end this week at 19.79, up from 16.67 a week ago. A weekly close above $68.71 with momentum rising above 20.00 would be an upgrade to positive. Buy weakness to my quarterly value level of $58.54. My weekly pivot is $67.22. Sell strength to my monthly risky level of $73.45.

Financial Select Sector SPDR Fund (XLF)
Financial Select Sector SPDR Fund (XLF)

Courtesy of MetaStock Xenith

The weekly chart for the Financial Sector (XLF)  ETF ($23.74 on May 15) remains positive if the ETF ends the week above its key weekly moving average of $23.64. The 200-week simple moving average is the "reversion to the mean" at $19.33. Weekly momentum is projected to rise to 29.91 this week up from 28.95 a week ago. Buy weakness to my weekly and quarterly value levels of $22.51 and $21.40, respectively. My annual pivot is $23.65. Sell strength to my monthly and semiannual risky levels of $25.25 and $25.87, respectively.

Health Care Select Sector SPDR Fund (XLV)
Health Care Select Sector SPDR Fund (XLV)

Courtesy of MetaStock Xenith

The weekly chart for the Health Care Sector (XLV) ETF ($75.77 on May 15) remains positive if the ETF ends the week above its key weekly moving average of $74.94. The 200-week simple moving average is the "reversion to the mean" at $66.73. Weekly momentum is projected to rise to 74.30 this week, up from 74.05 a week ago. Buy weakness to my weekly, monthly and quarterly value levels of $74.34, $71.25 and $70.15, respectively. Sell strength to my annual risky level of $78.09.

Utilities Select Sector SPDR Fund (XLU)
Utilities Select Sector SPDR Fund (XLU)

Courtesy of MetaStock Xenith

The weekly chart for the Utilities Sector (XLU) ETF ($51.94 on May 15) remains positive but overbought with the ETF above its key weekly moving average of $51.54. The 200-week simple moving average is the "reversion to the mean" at $44.77. Weekly momentum is projected to remain above the overbought threshold of 80.00 at 84.72. Buy weakness to my annual pivot of $50.72. My quarterly and weekly pivots are $51.19 and $52.08, respectively. Sell strength to my semiannual risky level of $54.29.

Technology Select Sector SPDR Fund (XLK)
Technology Select Sector SPDR Fund (XLK)

Courtesy of MetaStock Xenith

The weekly chart for the Technology Sector  (XLK) ETF ($55.87 on May 15) remains positive but overbought with the ETF above its key weekly moving average of $54,21. The 200-week simple moving average is the "reversion to the mean" at $41.80. Weekly momentum is projected to remain well above the overbought threshold of 80.00 at 94.18. Buy weakness to my quarterly value level of $50.61. My monthly, weekly and semiannual pivots are $54.25, $54.09 and $53.45, respectively. My annual pivot was a risky level of $55.49. I show no risky levels at this time.

iShares Transportation Average ETF (IYT)
iShares Transportation Average ETF (IYT)

Courtesy of MetaStock Xenith

The weekly chart for the Transportation Sector (IYT) ETF ($163.43 on May 15) is neutral with the ETF below its key weekly moving average of $163.90. The 200-week simple moving average is the "reversion to the mean" at $145.09. Weekly momentum is projected to inch up to 35.38 this week from 35.23 on May 12. Buy weakness to my weekly and annual value levels of $160.91 and $139.43, respectively. Sell strength to monthly and annual risky levels of $178.77 and $182.54, respectively.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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