Stock Sectors React to New Fed Chair Yellen

NEW YORK (TheStreet) -- Traders and investors liked the overall tone of the first Congressional testimony by the new Federal Reserve Chair Janet Yellen. The doves wanted assurances that the policies in place would continue. That message was heard loud and clear.

On Tuesday I wrote "Watch Out! These 8 ETFs Have Negative Weekly Chart Profiles," where I presented key levels to focus on in reaction to Yellen's testimony. Here's a brief summary:

Materials Select Sector SPDR (XLB) ($45.44) closed above its five-week modified moving average at $44.73, as commodity speculation may return on Yellen's low interest rate pledge.

Industrial Select Sector SPDR (XLI)($50.71) did not close above my semiannual pivot at $50.88, after trading as high as $50.91 in reaction to Yellen. This implies industrials may lag with a status quo Fed.

Consumer Discretionary Select Sector SPDR (XLY) ($64.52) needed to close above my semiannual pivot at $65.13 to be an indication that consumer discretionary spending would be helped by a Yellen Fed.

Consumer Staples Select Sector SPDR (XLP) ($41.57) closed above its 200-day simple moving average at $41.34 instead of closing below my annual pivot at $40.69, which implies some improved spending for consumer staples.

Energy Select Sector SPDR (XLE) ($84.74) which is above its 200-day SMA at $83.52. A close Friday below its five-week MMA at $85.28 will continue to reflect continued weak demand for energy and oil-based products.

The mixed bag of price actions among these ETFs suggests that Yellen's testimony was not game-changing.

The major averages posted significant gains on Tuesday. As a result, it becomes more likely that the five major averages will avoid confirming cycle highs at least for this week. However, the question is: will new all-time or multiyear highs be set over the weeks ahead?

The Dow Industrial Average (15,995) traded as high as 16,013.59 on Tuesday, moving above this month's risky level at 15,986, but remains shy of my semiannual pivot at 16,245. The Dow is the only one of the five major averages that did not set a new all-time intraday high in January; that was set at 16,588.25 on Dec. 31. Despite the rally, the weekly chart continues to show declining 12x3x3 weekly slow stochastics, with this average just below its five-week modified moving average at 16,007. My annual value levels remain at 14,835 and 13,467, and quarterly and semiannual risky levels at 16,761 and 16,860.

The S&P 500 (1819.0) traded as high as 1820.74 on Tuesday, still shy of its monthly risky level at 1832.9. The S&P 500 set its all-time intraday high at 1850.84 on Jan. 15, with my quarterly risky level at 1896.0. The weekly chart still shows a declining 12x3x3 weekly slow stochastic with the index above its five-week MMA at 1803.7. My annual value levels at 1539.1 and 1442.1 with semiannual pivots at 1797.3 and 1764.4.

The Nasdaq (4191) traded as high as 4196 on Tuesday, approaching its multiyear intraday high at 4246.55 set on Jan. 22. My monthly and quarterly risky levels are above at 4267 and 4274. The Nasdaq is the major average that did not shift to negative on its weekly chart last Friday, as it closed above its five-week MMA at 4110. The 12x3x3 weekly stochastic is declining below 80.00, providing a negative divergence. The earlier weakness into Feb. 5 stayed above my semiannual value levels at 3930 and 3920 as the market's ballast. My annual value levels are 3471 and 3063.

The Dow Transportation Average (7254) has become a laggard with a high of 7282 on Tuesday, which is between its semiannual pivots at 7245 and 7376, and well below this month's risky level at 7412. It is also below its all-time intraday high at 7591.43 set on Jan. 23. A quarterly pivot has been a stabilizer at 7086. The weekly chart remains negative, with a declining 12x3x3 weekly slow stochastic with its five-week MMA at 7273.

The Russell 2000 (1129.16) is an even bigger laggard, with a high at 1131.01 on Tuesday, between its semiannual pivots at 1130.79 and 1133.29. The all-time intraday high is 1182.04 set on Jan. 22 vs. my quarterly pivot at 1180.35, and below this month's risky level at 1189.18. The weekly chart profile shows a declining 12x3x3 weekly slow stochastic and is still below its five-week MMA at 1137.41. My annual value levels are 966.72 and 879.39.

Investors are playing defense even with the Yellen bounce as the Dow Utility Average (511.65) surged to a new 2014 high at 512.97 following the Fed Chief's testimony. Utilities are the year-to-date leader, up by 4.3%. The weekly chart has been positive since the second week of January, with rising 12x3x3 weekly slow stochastics and with weekly closes above its five-week MMA, now at 498.84. My annual and quarterly value levels are 497.53 and 496.84, with a semiannual pivot at 504.74 and semiannual and annual risky levels at 524.37 and 548.70.

The bottom line is that Yellen hasn't shaken up the game too much, as year-to-date volatility has still been within the boundaries defined by my monthly, quarterly, semiannual and annual levels -- which remain a tangled bowl of spaghetti.

We needed to have simultaneous weekly closes below the five-week MMAs for all five major averages with declining stochastic readings to make a big change. That has not happened yet.

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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