ENERGY ETFS WEAKEN WITH OIL -- MORTGAGE LENDER AND REITS SELLOFF -- COVENTRY HEALTHCARE AND TYSON HAVE STRONG DAYS

ENERGY ETFS ARE AVERAGING DOWN... On Friday, crude oil breached the important $60 resistance barrier intra-day, but couldn't hold the gain. In today's trading, crude is down more than $2. Energy ETFs are struggling with some resistance barriers of their own. Chart 1 shows the Energy SPDR (XLE) trading back below its 50-day moving average. Chart 2 shows Oil Service Holders (OIH) backing off from its 50- and 200-day lines. There may be another technical factor at work to explain the selling. The XLE had recovered 62% of its December/January decline, which often acts as a resistance barrier. The OIH, which has been the weaker of the two energy ETFs, recovered about 50% of its prior decline before encountering new selling. Needless to say, these elements combine to put the energy rebound in jeopardy.

Chart 1

Chart 2

COUNTRYWIDE FINANCIAL BREAKS 50-DAY LINE ... Along with the slide in homebuilding stocks that started last week (and continues today), mortgage leaders are experiencing some significant profit-taking. One of the most notable is Countrywide Financial which is helping pull down the financial sector today. The daily bars in Chart 3 show CFC falling below its 50-day moving average. A more significant test of initial support will take place at the January low around 40. The point & figure boxes in Chart 4 show that an initial p&f sell signal has already been given. It may be coincidental, but Real Estate Investments Trusts (REITs) are also coming under some selling pressure.

Chart 3

Chart 4

REITS ARE SELLING OFF ... REITs have come under selling pressure for the first time in a long time. In fact, they're the day's weakest overall market group. The daily bars in Chart 5 show the Dow Jones Real Estate iShares (IYR) down 1.73% today after a Friday drop. Notice the heavy downside volume bars. There's no question that the REIT group is dangerously over-extended by any technical measure we have. A pullback toward its 50-day moving average wouldn't be surprising. Simon Property is one of the day's biggest individual REIT losers. Its daily bars in Chart 6 show essentially the same pattern as in Chart 5. It looks like time to do some lightening up in this very overbought group.

Chart 5

Chart 6

TYSON FOODS LEADS CONSUMER STAPLE BOUNCE ... With the market on the defensive, some money has been moving into consumer staples. On Friday, I showed a beer stock (Molson Coors) reaching a new record. Today's staple leader is a food stock. Tyson Foods to be exact. Chart 7 shows the stock having just broken through its 2006 highs. And it's been rising on strong volume. Its relative strength ratio (top of Chart 7) has just broken an eight-month down trendline. Absolute and relative strength is a bullish combination. So is the chart action in Chart 8. The monthly bars show that TSN has just broken a three-year down trendline. The stock appears headed toward its mid-2004 high just above 20. The solid line on Chart 8 is the TSN:SPX relative strength ratio. It's started rising for the first time in three years. I'm not sure whether that's a sign that the market is turning more defensive, or whether it's just time to do some food shopping.

Chart 7

Chart 8

COVENTRY HEALTHCARE TURNS UP... Healthcare stocks have also been showing better absolute and relative strength since the start of the new year. One of the group's leaders is Conventry Health Care. And it's one of today's top market performers. The daily bars in Chart 9 show the stock jumping to a five-month high after recently breaking through its 200-day moving average. Its relative strength (green) line has just reached a new four-month high. The weekly bars in Chart 10 also show the stock breaking through a yearlong resistance line. Its weekly relative strength (green) line has started to rise again. That's a healthy combination.

Chart 9

Chart 10