by Steve Auger
Last week ended turned out to be very bullish, primarily due to rumors of fiscal cliff compromises so it was a good thing that most of the sector plays were sidelined. This week is very difficult to read, primarily due to the major move upward in all the sectors. Whether this movement can continue without stalling remains to be seen.
The following is this week's ETF sector analysis of the DJ symbols IYZ, IYW, IYT, IYM, IYK, IYJ, IYH, IYF, IYE, IYC and IDU.
iShares DJ US Telecom
ETF Symbol: IYZ
There was a run-up in DJ US Telecom last week, breaking out of a descending channel. It is unclear where this ETF is headed this week and it is best to stay on the sidelines until a good signal can be found.
iShares DJ US Technology
ETF Symbol: IYW
DJ US Technology - I'm really sticking my neck out with this reading. There was a breakout from a descending channel similar to US Telecom (IYZ) but it appears that for US Technology there is limited upside potential. And unlike Telecom, IYW is still below the 200 day Simple Moving Average (SMA). Look for the price to fall down to the upper trend line of the descending channel. Place a protective stop at $72.25.
iShares DJ Transportation Average
ETF Symbol: IYT
DJ Transportation Average had a good upward move last week and pierced the 200 day SMA and then retraced back to finish the week at the SMA. It looks like there is some more room to move up until it hits resistance at $92.4. However it is not worth jumping in at this point.
iShares DJ US Basic Materials
ETF Symbol: IYM
DJ US Basic Materials had a bullish week but the short position was not stopped out. The price broke out of the descending channel, normally a bullish indicator, but it doesn't seem likely that there will be much upward movement from here. Keep the protective stop at $67.75.
iShares DJ US Consumer Goods
ETF Symbol: IYK
DJ US Consumer Goods - The strength of this ETF over the last two weeks has been phenomenal. The price is sitting just above a resistance level derived from a previous major peak. Let's go long here with a loose protective stop at $75. There will likely be a small pullback early this week and we don't want to get stopped out in the middle of this bull run.
iShares DJ US Industrials
ETF Symbol: IYJ
iShares DJ US Healthcare
ETF Symbol: IYH
DJ US Healthcare - This ETF will likely continue up to $85 before hitting resistance Not worth playing as the risk versus reward is not good.
iShares DJ US Financial
ETF Symbol: IYF
DJ US Financial - This looks like a good shorting opportunity as the price is butted up against a bearish trend line. The ETF should drop down to the support level. Place a protective stop at $59.50.
iShares DJ US Energy
ETF Symbol: IYE
DJ US Energy - stay on the sidelines as there is no clear signal
iShares DJ US Consumer Services
ETF Symbol: IYC
DJ US Consumer Services - stay on the sidelines as there is no clear signal.
iShares DJ US Utilities
ETF Symbol: IDU
DJ US Utilities - Utilities had a very good week and the price is now at a resistance level. This would imply that there will be a reversal. However the OBV is very bullish. Since there are conflicting signals it is best to stay on the sidelines.
Sector Inspector's Sign Language
- Sell short,continue to hold a short position or close long position
- Do not initiate a new position
- Go long, continue to hold a long position
Technical Analysis Terminology
Disclosure: The author "Walks the walk" in addition to "Talking the Talk".