Consumer Staples Select Sector SPDR Fund (XLP) – A large relative strength symmetrical triangle has been ongoing since 2011. Long only equity portfolios could have would have benefitted from navigating their allocation to XLP as this pattern dictated. It appears that XLP has resolved this pattern as it broke out last week. This could have significant technical implications as it suggests sustained outperformance in XLP and a shift to this defensive sector ETF.
Energy Select Sector SPDR Fund (XLE) – XLE broke through support near 75.50-76 and in the process it has flattened out the 30-week moving average and turned down the 10-week moving average. Traders may use this breakdown level as initial resistance. For this report, initial resistance now corresponds to the top of the 4/15/13 downside gap and the 50-day/10-week moving averages. Initial support is now the bottom of the 1/2/13 downside gap (71.44).
Industrial Select Sector SPDR Fund (XLI) – XLI is now sitting on initial support near 40 or the Feb. 2013 low. A violation of this support may require a portfolio adjustment as it opens the door for a move towards next support near 38-38.50. To the upside, initial resistance continues to reside at the Mar. 2013 high (42.16). From a relative strength perspective, weakness continues to prevail since the Mar. 2013 technical breakdown vs. SPX.
Utilities Select Sector SPDR Fund (XLU) – Initial resistance at 40, although purely psychological, is being tested. The ability to clear this supply opens the door for a move towards 42 or near the May 2008 high and the top of the 2009 uptrend channel. With that said, the story seems to really be on the relative strength chart as XLU is also attempting to breakout above the Nov. 2012 high as well as the 2011 downtrend. In doing so, this calls for continued outperformance.
Materials Select Sector SPDR Fund (XLB) – XLB is threatening a breakdown form a 3.5 month double top formation and the violation of key initial support near 37-37.35. This support zone corresponds to the Feb. 2013 low, the converged 10/30-month moving averages, and the Oct. 2011 uptrend line. To the upside, initial resistance is tweaked down to 39.50-40 or the Apr. 2013 high and the Jan/Mar. 2013 highs.
iShares Dow Jones US Telecom Index (IYZ) – It appears that IYZ is coming up to a major test of resistance near 26.25 or the Sep. 2013 high and also near the 61.8% Fibonacci retracement of the 2007-2008 decline (26.57). From a relative strength perspective, IYZ has also rallied sharply. Although not an optimal entry level, from a portfolio perspective, an overweight stance is warranted. To protect profits, initial support remains near the Apr. 2013 breakout level (25.27).
J. Beck Investments is an independent provider of technical research for ETFs.