2 new market-leading sectors
Latest sector analysis shows consumer staples and health care could be the new star performers. Also keep an eye on energy and technology, and avoid lagging financials.
- The daily chart shows more important support now in the $32.30-$32.70 area with major support at $31.50
- The relative performance, or RS chart, measures how a stock or ETF is performing relative to the S&P 500. For XLV, we can see that it turned up in February and completed a bottom formation on Monday (point 1) as it broke through resistance at line b
- The daily on-balance volume (OBV) has turned up from support at line d, but has not yet moved to new highs
- The 2008 highs in XLV are at $33.70, and above that, I have further targets in the $36.50-$38 area
- The long-term upper trend line resistance, line e, is currently at $31.20, and the 2008 highs at $29.29 have been exceeded
- The RS analysis for XLP shows a similar formation having just moved above the key resistance at line f, which confirmed that XLP was outperforming the S&P 500 (point 2)
- The daily OBV has moved through resistance (line g) after holding long-term support in March, line f
- XLP is overextended in the short term with first good support at $30-$30.20 and much stronger support at $29.50
- The daily chart shows that the 38.2% support level has been reached with the 50% support at $25.40. A break below the $25-$25.11 level would suggest a test of the March lows
- The RS analysis shows well-defined resistance (line b), which, if overcome, would be a positive for the sector
- The daily OBV is still negative but has not shown any heavy selling pressure so far. The weekly OBV did confirm the February highs, which is a positive for the intermediate term
- There is short-term resistance now at $26 (line a) and a close above this level would stabilize the short-term outlook. More important resistance is at $26.66
- XLF closed at next support in the $16-16.10 area. A decisive break of this level would project a decline to the $15.40 area. This would equal the prior decline (100%)
- The RS analysis formed lower highs in February which identified this sector as an underperformer. It has been weaker than the S&P 500 for the past few months as the RS has formed lower lows, line h
- It would take a move in the RS above its downtrend, line g, to turn it around
- XLF has first resistance now at $16.50-60 and a close above $16.75 is needed to suggest that this sector has stabilized
- The daily OBV (not shown) continues to be weak and show no signs yet of bottoming
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After enjoying a smooth rise in stock prices since May, investors are about to be hit with another bout of volatility.
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