Exchange traded fund traders who are picking and choosing their overweight market exposures may want to stick to industrials and avoid materials.
The Industrial Select Sector SPDR (NYSEArca: XLI) has held onto a long standing up-trend since the late 2011 lows, writes Julius de Kempenaer for Relative Rotation Graphs.
However, industrials experienced a short interruption during the summer, but it appears temporary when the slightly falling resistance line was crossed recently, de Kempenaer said.
Since the October low, XLI has increased 16.2%. After the recent rally, the industrials sector is now among the leading areas of the market, with the highest relative momentum.
Additionally, XLI is starting to break away from its downtrend as its price movements begin to form a new series of higher highs and lower lows. Looking at the JdK RS-Ratio – a normalized measure of trend in relative strength to the S&P 500, XLI’s RS-Ratio is beginning to form an uptrend as well, with a current reading of 100.07. Values over 100 indicate an up-trend in relative strength, whereas values below 100 indicate a down-trend.
On the other hand, the Materials Select Sector SPDR (NYSEArca: XLB) has experienced a long-term up-trend since the 2011 lows and also suffered a minor pull back. However, the materials ETF is only up 9.3% since its mid-October low.