It appears that investors are maneuvering within sectors once again.

For example, beaten up sector ETFs like the Utilities Select SPDR Fund (XLU) and the iShares US Telecom ETF (IYZ) have been showing signs of improvement on their respective price and relative strength charts.  Keep in mind that this is a sign of stabilization not necessarily leadership.

As a portfolio is a zero sum game, improvements in one sector ETF must be fed from weakness in another.  With that said, tactical outflows are being picked up in what still remain intermediate to longer-term technical leadership sector ETFs like the Technology (XLK)/Energy (XLE) Select Sector SPDR Funds.

Regardless, this allows for a tactical shift to take advantage of the sector rotation that appears to be unfolding.  On another note, I would like to introduce a contrarian call that might be in the early stages, but needs to be watched. There could be a number of head and shoulders top patterns early in the making.  This is also true for the S&P 500 on the whole.   If so, it may need another few months to develop.

Technology Select Sector SPDR Fund (XLK) –  The ability to find support at the bottom of the 5/3/13 upside gap and the 50-day moving average suggest that the recent setback has the makings of a healthy consolidation rather than a trend reversal.  Failure to maintain support however opens the door for a test of secondary support near 29, which corresponds to the April 2013 low and the 2009 uptrend line.  The May 2013 high (32.31) remains initial resistance.

Financial Select Sector SPDR Fund (XLF) –  XLF continues to consolidate after reaching a high in May of 20.35.  The ability to maintain support at the rising 10-week moving average (19.10) has prevented a deeper correction towards 18.68 or the bottom of the 5/2/13 upside gap.  On the other hand, a move above the May 2013 high opens the door for a move closer towards 22 or the 50% Fibonacci retracement of the 2007-2009 decline.

Health Care Select Sector SPDR Fund (XLV) –  Although the longer-term trend remains in a healthy state, there are a couple of reasons for sitting on the sidelines for the time being:  the first is the violation of the January 2013 uptrend line and the second is a potential head and shoulders top pattern that looks to be forming.  Neckline support seems to reside near the 4/18/13 low (46.76).  The head corresponds to the May 2013 high (50.40).

Consumer Discretionary Select Sector SPDR Fund (XLY) – Although a negative outside week pattern developed during 5/24/13, there were no indications of a trend reversal.  In fact, the ability to maintain support at the 5/3/13 upside gap (54.88) could set into motion a test of the May 2013 high (58.09).  On the other hand, the violation of support opens the door for a move into the low-50s or the 3/19/19 pivot low, and the 150-day/30-week moving averages.