by Steve Auger
Sector Analysis Summary
Last week was rather dismal and most of the sector charts have turned negative with very few bright spots. This being said, we are in the middle of earnings season and the stock markets could turn bullish on a few good quarterly reports. In any case, most of the action is on the short side - for aggressive traders only.
iShares DJ US Telecom
ETF Symbol: IYZ
DJ US Telecom dropped out of an ascending channel last week, signaling bearishness. IYZ will likely retreat to the 200 day Simple Moving Average. I suggest sitting on the sidelines until a clear picture of the general stock market shapes up.
iShares DJ US Technology
ETF Symbol: IYW
DJ US Technology dropped out of an ascending channel last week, signaling bearishness. IYW is far above the 200 day Simple Moving Average. Williams%R is signaling the start of a bearish trend (double dip below -80). The On-Balance Volume was already showing bearish divergence. Aggressive traders may wish to short this ETF with an initial target of $74.50. Keep in mind however that we are in the middle of earnings announcements and the general market could turn positive any time. Those speculators going short should put in a protective stop at the recent high price of $79.
iShares DJ Transportation Average
ETF Symbol: IYT
DJ Transportation Average has formed a symmetrical triangle, which is neither bullish nor bearish. The On-Balance Volume is showing bearish divergence while the Williams%R is neutral. The falling price of oil has to be bullish for the transportation sector, counterbalancing the bearish OBV. If you are already short the transportation sector then continue to hold your position with a protective stop above the upper trend line shown in red on the chart. Otherwise stay on the sidelines as the price of this ETF could go either way.
iShares DJ US Basic Materials
ETF Symbol: IYM
DJ US Basic Materials is trading within a descending channel. The On-Balance Volume is showing bullish divergence and Williams%R is neutral. The Basic Materials sector will benefit from falling oil prices and IYM will likely be bullish soon. Right now I don't have enough conviction to give this ETF a green light. Aggressive traders could go long with this IYM provided other sectors are held short. The stock market could be ready to fall and IYM would be dragged along with it.
iShares DJ US Consumer Goods
ETF Symbol: IYK
DJ US Consumer Goods broke down from the ascending channel it was trading in previous weeks. The On-Balance Volume is exhibiting bearish divergence and Williams%R may be about to double dip down to -80 which would be a bearish trend. Normally Consumer Goods is a defensive play so be careful if you intend to short this ETF. Better to stay on the sidelines.
iShares DJ US Industrial
ETF Symbol: IYJ
The DJ US Industrial chart is difficult to read this week. There was a definite breakdown from the ascending channel it was trading in. However the ETF bounced off a support level and is in between support and resistance. Could be forming a head-and-shoulders pattern. Williams%R appears bearish but On-Balance Volume is erratic (bullish?).
iShares DJ US Healthcare
ETF Symbol: IYH
DJ US Healthcare broke below the bullish trendline but is now sitting just above support. The Williams%R is showing a bearish trend while OBV is bullish. I would be inclined to buy on a stop above the resistance level shown on the chart and sell short below the support level.
iShares DJ US Financial
ETF Symbol: IYF
DJ US Financial is quite bearish. The price broke breached the bullish trend line then bounced off a support level. OBV and Williams%R are both exhibiting bearish behaviour. Enter a short position on a stop below the support line shown on the chart.
iShares DJ US Energy
ETF Symbol: IYE
DJ US Energy is trading in a descending channel. Williams%R is showing a bearish trend while OBV is not so obvious. Enter short on a stop below the support line shown on the chart.
iShares DJ US Consumer Services
ETF Symbol: IYC
DJ US Consumer Services is looking bearish, having dropped in price last week but it bounced off a support level and has since risen. The Williams%R is inconclusive and the OBV is bullish. I am staying on the sidelines here until I understand where the general market is headed.
iShares DJ US Utilities
ETF Symbol: IDU
DJ US Utilities broke down from the ascending channel. The Williams%R is exhibiting a bearish trend but the On-Balance Volume is showing bullish divergence. Stay on the sidelines here.
Disclosure: The author "Walks the walk" in addition to "Talking the Talk".