Sector Analysis 19Feb12
/by Steve Auger
Sector Analysis Summary
Transportation and Basic Materials remain in the dog house. I'm tossing Industrials into the same category. Health Care and Consumer Goods are given a yellow light status. The remaining sectors have been given the green light for this week.
iShares DJ US Telecom
ETF Symbol: IYZ
Last week I said "If there is significant penetration of the 200-day SMA with strong volume then it would be a good time to jump on board in spite of the cycles analysis." DJ US Telecom broke through the 200 day moving average on Monday but was fairly lack-luster until Thursday when the ETF took off. It is now trading near the top of the bullish channel and will probably cool off for a few days but should continue upwards longer term. I'm giving this ETF a green light as it broke through a resistance level of $22 from late September. A protective stop should be placed below the support level shown on the chart.
iShares DJ US Technology
ETF Symbol: IYW
DJ US Technology continues to impress. The ETF is still trading in a tight bullish channel. It remains a green light. The support level has been raised to $72. A protective stop should be placed below this level.
iShares DJ Transportation Average
ETF Symbol: IYT
DJ Transportation Average broke down the week before last and did not impress this last week. Looking at the Williams%R indicator, it appears that the indicator could return below -80. If it does so then the ETF will be in a downward trend. This ETF continues to be given a red light.
iShares DJ US Basic Materials
ETF Symbol: IYM
Similar to IYT, DJ US Basic Materials broke down the week before last and did not impress this last week. The price bounced off a long term support level but long term direction is unpredictable. The ETF could very well retreat down to the support level or even penetrate it. It is unlikely that the price will rise to the previous trend line so this ETF keeps its red light status.
iShares DJ US Consumer Goods
ETF Symbol: IYK
DJ US Consumer Goods did well last week in spite of the "yellow light". The ETF is due for a small pullback as it is at the top trend line of the wedge but the price shouldn't breach the support level identified on the chart. This ETF continues to have a yellow light status due to the likelihood of a pullback and the On-Balance Volume which appears to be forming bearish divergence.
iShares DJ US Industrial
ETF Symbol: IYJ
DJ US Industrial has been stopped in its tracks for two weeks, unable to penetrate $70.60 level. Curiously it also hasn't dropped below $69.50 either. In any case there is an ominous bearish divergence with the On-Balance Volume (OBV) developing and it is time to take profits on this ETF. The status is now a red light. BUT if the price pushes through the $70.60 level convincingly AND the OBV recovers then the ETF will become a buy again. It is still (kind of) trading within the bullish channel.
iShares DJ US Healthcare
ETF Symbol: IYH
DJ US Healthcare is still in no man's land. Wait for a new pattern to form before entering a position.
iShares DJ US Financial
ETF Symbol: IYF
DJ US Financial is still trading above the channel center line. This ETF remains a green light. I don't see any major warning signals at present.
iShares DJ US Energy
ETF Symbol: IYE
DJ US Energy retraced but is still trading within an ascending wedge. The price is at a cycle high but won't drop far. So long as the ETF stays above the lower trend line of the wedge the ETF should be held long.
iShares DJ US Consumer Services
ETF Symbol: IYC
DJ US Consumer Services is traveling a tight channel upward. Note that the support level has been moved up so the protective stop should also be moved up. All systems are go with this ETF. The green light status is retained.
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iShares DJ US Utilities
ETF Symbol: IDU
DJ US Utilities is now given a green light. This is based on the trend line that is emerging (see chart) and the OBV bullish divergence. The chart is admittedly still a little sloppy but observe the resistance level on the chart. Actually a support level right now as it just broke through this level late last week. I'm expecting the price to improve from here.
Disclosure: The author "Walks the walk" in addition to "Talking the Talk".
