Sector Analysis: What is strong? What is weak? Going into summer! Sector analysis is key to trading US Stock market. For example, when the financial market took a hit in 2008, technology led us out. We do sector analysis every month to know where our trades should be positioned.
Summary
Here is a weekly chart of the XLY vs XLP. The strongest vs the weakest sector for pairs trading.
$XLK: Technology ETF
The first sector we will analyze is the Technology Sector ETF. It is the sector that is had been leading the market. Below is the weekly chart for the XLK ETF. The green bullish setup occurred in late 2015. The bullish trend started in 2016 and has yet to experience a major pull back.
Here is the zoomed in chart version below. It shows that in 2018, we are in a bullish consolidation range between 63.53 and 68.35. Probabilities are still towards the bullish side until we break the major support at 63.53 which will indicate a possible major pull back can occur.
XLF: Financial ETF
The second sector we will analyze is the Financial Sector ETF. It is the sector that took down the markets. The bullish setup triggered in Aug 2016. It has been in a bullish trend with no major pull back yet.
The zoomed in chart shows two resistances. There is high probability for the financial sector to go through its first major pull back as long as the resistance at 28.10 holds. To start this major pull back, the support at 26.78 has to break.
XLI: Industrial ETF
The third sector we will analyze is the Industrial Sector ETF. The bullish trend started in late May 206 and has yet to go through a major pull back like the other two sectors.
The zoomed in chart shows we have a high probability of a major pull back as long as the resistance at 76.14 holds. The support that is stopping it is at 72.26 and we are right at it now.
XLB: Materials ETF
The fourth sector we will analyze is the Material Sector ETF. The bullish trend started in late May 206 and has gone through a weak major pull back to 56.13. It is consolidating now between 59.72 and 56.13 which is not a good sign for the bulls. It has to break the resistance at 59.72 very soon or the consolidation at these levels could destroy the major pull back and cause a bearish trend to occur.
Below is zoomed chart. It shows the two resistances. The one controlling the major pull back is 59.72.
$XTL: Telecom ETF
The next sector is the XTL, the Telecomm sector. Below is the weekly chart. It is consolidating between 67.92 and 73.31. It is neither bullish or bearish. The consolidation pattern started in November 2016 from a bullish trend. As a result, there is a higher probability more towards the bearish side now.
$XLV: Healthcare ETF
The next sector is the XLV, the Healthcare sector. Below is the weekly chart. It started a short term bullish trend June 2017 but then went through a weak major pull back this year. We are now consolidating at the major pull back level which is not good for the bulls. A couple of months of this consolidation, a bearish trend can possible occur.
$XLU: Utilities ETF
The next sector is the XLU, the Utilities sector. Below is the weekly chart. Many times, it has tried to start a long term bullish trend but it would never hold for a long time. For the first time since 2015, we got a bearish setup. The major resistance for this setup is 52.20. As long as this resistance holds, we have a possibility of the bearish trend to trigger at the blue dots.
$XLY: Consumer discretionary ETF
The next sector is the XLY, the Consumer Discretionary sector. Below is the weekly chart. This is the strongest sector so far. It started the bullish trend 2017 after a long period of consolidation.
Here is a zoomed chart. The supports are going up which indicate the bullish trend is still very strong. It has a high probability of retesting the high and breaking it.
$XLP: Consumer Staples ETF
The next sector is the XLP, the Consumer Staples sector. Below is the weekly chart. Notice we have not had a bearish red shared area since 2009. We now have one.
Here is a zoomed chart. You can see price has hit the blue breakout dots and triggered the entry for the bearish trade setup. It was triggered last week and it followed through this week.
$XLE: Energy ETF
The next sector is the XLE, the Energy sector. Below is the weekly chart. It is a long term consolidation pattern between 64.58 and 76.97. The middle is 71.43 which as broken 3 weeks ago. Therefore, the probability to retest the top is high now.
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