HEALTHCARE AND CONSUMER STAPLES SPDRS GRAB THE LEAD -- CONSUMER STAPLES SPDR EXCEEDS CHANNEL LINE -- EQUAL-WEIGHT SECTOR ETFS OUTPERFORM SECTOR SPDRS -- TECHS AND MATERIALS SHOW RELATIVE WEAKNESS -- GDX FORMS BEAR WEDGE WITH OVERSOLD BOUNCE
HEALTHCARE AND CONSUMER STAPLES SPDRS GRAB THE LEAD... Link for todays video. By far, the Healthcare SPDR (XLV) and the Consumer Staples SPDR (XLP) are the top performing sectors SPDRs year-to-date. PerfChart 1 shows XLV and XLP crushing the competition with outperforming exceeding 3%. The Finance SPDR (XLF) is the next closest competitor with a 1.75% outperformance. Note that these percentages show relative performance, which is the absolute gain in the SPDR less the absolute gain in SPY. All sectors are up year-to-date. The ones with negative relative performance are up less than SPY. The ones with positive relative performance are up more.
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Chart 1
Despite relative strength from the defensive sectors, the Consumer Discretionary SPDR (XLY), Industrials SPDR (XLI) and Finance SPDR (XLF) are outperforming overall. These offensive may be lagging consumer staples and healthcare, but they are certainly not slouching. Negative relative performance by consumer discretionary, finance and industrials would be a negative for the market. Overall, the market is doing fine as long as these three at least outperform the benchmark.
CONSUMER STAPLES SPDR EXCEEDS CHANNEL LINE... Keep in mind that the sector SPDRs are dominated by large-caps. In fact, the top 3 to 5 stocks in these ETFs often account for over 30% of the weighting. This means SPDRs are not that well diversified. The top three stocks in the Healthcare SPDR account for 32.60% of the ETF, while the top four stocks in the Consumer Staples SPDR account for a whopping 42.14% of the ETF. XLP will clearly live and die by the performances of PG, KO, PM and WMT. You can find more about SPDR holdings at the official website (sectorspdrs.com). Chart 2 shows XLP within an uptrend the last three years. The gray lines mark the Raff Regression Channel, which ends in the 34 area. The blue lines mark a rising channel. XLP just moved above the upper trend line, which means it is overbought. RSI confirms overbought conditions with a move above 70 four weeks ago. RSI remained overbought for seven weeks in 2011. Even though the trend is up and strong, this ETF is ripe for a correction or consolidation. Broken resistance turns first support in the 36 area.
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Chart 2
Chart 3 shows the Healthcare SPDR with two rising channels. XLV exceeded the upper trend line of the large channel and recently reached the upper trend line of the small channel. Actually, this channel is not that small because it extends from August 2011. It would look big on the daily chart. In any case, XLV is also overextended after a big run and ripe for a correction. Broken resistance in the 41 area turns first support. RSI confirms overbought conditions because it has been above 70 for nine weeks.
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Chart 3
EQUAL-WEIGHT SECTOR ETFS OUTPERFORM SECTOR SPDRS... All sectors ETFs and major index ETFs are up year-to-date. In fact, all are up sharply in less than three months. Chart 4 shows two PerfChart screen shots to compare the market-cap weighted SPDRs against the equal-weight sector ETFs from Guggenheim. The top PerfChart shows the sector SPDRs. The bottom PerfChart shows the equal-weight sector ETFs. First, notice that the S&P 500 ETF (SPY) is up around 9% year-to-date and the S&P 500 Equal-Weight ETF (RSP) is up 10.54%. Second, notice that eight of the nine equal-weight ETFs are outperforming their large-cap counter parts. The Utilities SPDR is the exception. Small and mid-caps are leading in almost all areas in 2013.
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Chart 4
Chart 5 shows these same sectors in relative performance mode. The top PerfChart shows the nine sector SPDRs relative to SPY. The bottom PerfChart shows the nine equal-weight ETFs relative to RSP. The general performance picture is the similar, but relative strength is healthcare is less when using the equal-weight ETFs. In fact, healthcare goes from first place with the market-cap SPDRs to fifth place with the equal-weight ETFs. The consumer staples sector is the strongest overall. It is first on the SPDR PerfChart and second on the equal-weight PerfChart. Overall, we can see that the consumer discretionary and finance sectors are the strongest offensive sectors. The technology and the materials sectors are the weakest in both groups. In fact, both show negative relative performance on the PerfCharts. Here are the symbols for the equal-weight sector ETFs: (RSP,RCD,RYT,RGI,RTM,RYE,RHS,RYH,RYU,RYF)
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Chart 5
GDX FORMS BEAR WEDGE WITH OVERSOLD BOUNCE... The Gold Miners ETF (GDX) is in a medium-term downtrend and a short-term uptrend. Chart 6 shows GDX becoming oversold after a sharp decline from 46 to 36, and then working off this oversold condition with a bounce. It is hard to estimate how far this oversold bounce will extend because the first resistance zone resides in the 42 area. The early February consolidation and medium-term trend line mark resistance here. With a rising wedge taking shape the last few weeks, traders should be on guard for a support break that would signal a continuation lower. Notice that the top three stocks account for over 30% of GDX.
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Chart 6
The indicator window shows the Gold Miners BPI ($BPGDM) falling below 10% in late February and reaching 3.33% on the low. This is oversold, but it is also a sign of a strong downtrend. The Bullish Percent Index measures the percentage of stocks on a P&F buy signal. A stock is either on a P&F buy signal or a P&F sell signal. There is no in between. Even though the BPI has turned up, I think it needs to break at least 30% to gain any upside traction.
BREAKING DOWN THE BULLISH PERCENT INDEX FOR GDX... The Gold Miners ETF has 30 stocks. This means only one stock was on a P&F buy signal when the Bullish Percent Index reached 3.33%. The BPI is currently at 10%, which means three of the thirty stocks are on P&F buy signals. I wanted to know which ones so I created a new chartlists with the thirty stocks and changed the chart style to P&F. Chart 7 shows the P&F charts for the three stocks. Helca Mining (HL) was the only stock to remain on a P&F buy signal this year. Even so, it peaked in early February and remains with an O-Column that is approaching the spring low. Also notice that this P&F chart extends back to 2009, over three years. The other two stocks, Randgold (GOLD) and Royal Gold (RGLD) triggered double top breakouts with advances the last few weeks. The short-term trends are up, but the longer trends are down. Notice that both stocks remain below their Bearish Resistance Lines (red trend lines). StockCharts.com tracks the Bullish Percent Index for several sectors and indices (19 in all). Click here for a complete list. Here is a list of all stocks in the Gold Miners ETF: (ABX,GG,NEM,AUY,KGC,SLW,AU,GOLD,BVN,AEM,GFI,EGO,NGD,RGLD,HMY,IAG,PAAS,AG, CDE,AUQ,ANV,HL,SSRI,NSU,AZK,SA,GSS,TRX,VGZ,GBG)
