Sector ETF Technical Update

Consumer Staples Select Sector SPDR Fund (XLP) – The pullback last week on the price chart as well as the relative strength chart appear to be merely corrective rather than the sign of a reversal. The reason being is that the dominant price trend remains clearly up and the relative strength breakout alludes to sustainable outperformance.  The charts will not move in just one direction, but a healthy uptrend suggests that corrections should be buying opportunities.

Energy Select Sector SPDR Fund (XLE) –  The steep selloff in Apr 2013 was follow by a sharp snapback.  However, damage was done to the chart as the 50-day moving average has now turned down and the lower low/high formation since Mar. 2013 is still in force.  The question now that traders must ponder is whether the 4/25/13 high has marked the next lower high.  In order to confirm another lower low, XLE will need to breach the Apr. 2013 low (73.52).

Industrial Select Sector SPDR Fund (XLI) –  Although XLI rallied last week after finding support near 40 or the Feb. 2013 low, this may have solidified some kind of neckline support of a complex head and shoulders top. A violation of this support confirms a near-term top and 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).

Utilities Select Sector SPDR Fund (XLU) – The path of least resistance is still up.  In fact, the ability to clear psychological supply at 40 has opened 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 looks to have moved above the Nov. 2012 high as well as the 2011 downtrend. This suggests that the outperformance to continue.

Materials Select Sector SPDR Fund (XLB) –  Broad sideways trading continues in a well defined range defined by the Jan/Mar. 2013 highs near 39.50-40 and the Feb/Apr. 2013 lows closer to 37-37.35. A move above the top of this range could set into motion a rally to the 2011 high (41.28).  On the other hand, a violation below initial support opens the door for a move to secondary support near 34.50-35 or the Nov. 2012 low and the bottom of the 11/19/13 upside gap.

iShares Dow Jones US Telecom Index (IYZ) – It appears that IYZ has broken out of a bullish flag formation on 4/19/13. The rally that followed has taken out formidable supply at 26.25 or the Sep. 2013 high.  This now opens the door for a test of the Jun. 2008 high (27.50).  From a relative strength perspective, IYZ has also broken out.  To protect profits initial support rises to 4/24/13 pivot low (26.03).