CHEMICAL STOCKS LEAD MATERIALS SECTOR -- EXXONMOBIL AND HALLIBURTON WEIGH ON THE ENERGY SPDR -- XOM BREAKS TREND LINE AS RSI TURNS DOWN -- MARKET CARPET HIGHLIGHTS RECENT UTILITY LEADERS -- UTILITIES SPDR HOLDS SHORT-TERM BREAKOUT
CHEMICAL STOCKS DRIVE THE MATERIALS SECTOR... Link for today's video. Know thy sector SPDR. When trading or investing in the nine sector SPDRs, it is important to know the top components because the top ten stocks in each sector account for over 40% of the sector's weight. Chartists should also understand which industry groups feature most prominently. For example, the Industrials SPDR (XLI) includes several big transport companies with Union Pacific (UNP) and United Parcel Service (UPS) in the top ten. The Materials SPDR (XLB) is heavily influenced by the big chemical companies because Monsanto (MON), DuPont (DD), Dow Chemical (DOW) and Praxair (PX) are the four biggest components. The Technology SPDR (XLK) includes two big telcos as AT&T (T) and Verizon (VZ) feature in the top ten. You can find the sector SPDR components at sectopspdrs.com. The list below shows the nine sectors with their top ten components. Chartists can use this list to create a PerfChart or CandleGlance chart to analyze the components. Chart 1 shows the performance for the top ten components of XLE using a PerfChart. International Paper (IP) is the only one below its two moving averages.
XLY: AMZN,CMCSA,HD,DIS,MCD,F,FOXA,TWX,SBUX,NKE
XLK: AAPL,GOOG,MSFT,IBM,T,VZ,CSCO,ORCL,QCOM,INTC
XLF: BRK.B,WFC,JPM,BAC,C,AIG,AXP,USB,GS,MET
XLI: GE,UTX,BA,MMM,UNP,HON,UPS,CAT,EMR,DHR
XLP: PG,KO,PM,WMT,CVS,PEP,MO,CL,MDLZ,COST
XLV: JNJ,PFE,MRK,GILD,AMGN,BMY,UNH,ABBV,CELG,BIIB
XLU: DUK,SO,D,NEE,EXC,AEP,SRE,PPL,PCG,PEG
XLE: XOM,CVX,SLB,OXY,COP,PXD,EOG,APC,HAL,NOV
XLB: MON,DD,DOW,PX,FCX,LYB,ECL,PPG,APD,IP
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Chart 1
EXXONMOBIL AND HALLIBURTON WEIGH ON THE ENERGY SPDR ... Exxon Mobile (XOM) accounts for 15.63% of the Energy SPDR (XLE), while Chevron weighs in at 14.79%. Together, these two major integrated oil companies account for over 30% of the ETF. Schlumberger (SLB) is in third place with a 7.31% weighting. Chart 2 shows a PerfChart with the top ten stocks in XLE over the last ten days. Note that XOM and Halliburton (HAL) show relative and absolute weakness. On the upside, EOG Resources (EOG), Occidental Petroleum (OXY) and ConocoPhillips (COC) shows relative strength. Relative weakness in XOM is a bit strange because the other major integrated oil stocks are fairly strong. This suggests that there may be a company specific issue weighing on XOM.
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Chart 2
XOM BREAKS TREND LINE AS RSI TURNS DOWN... Chart 3 shows ExxonMobil peaking just below 90 and turning down the last four days. Today I am going to show you a new technique for drawing trend lines when "normal" techniques are not feasible because of the angle or lack of a second point (peak/trough). The advance from late August to mid September resembles a flag or wedge, but it is not possible to draw a decent trend line because there is only one trough. I like to use the Raff Regression Channel in this case, but this indicator did not line up well so I sought for an alternative. This is a semi-log chart, which means the price scale is based on percentage change, not absolute price change. I first drew a line (red) connecting the August closing low with the September closing high to define the rate of ascent. I drew another line parallel to this line and made sure this line touches the early September low. This line marks the rate of ascent from the lows. A break below this line would suggest a change in momentum and argue for a short-term trend reversal, which occurred this week. The indicator window shows RSI breaking below 40 in early August and then hitting resistance in the 50-60 zone in mid September. RSI has since turned back down and moved below 50. I would consider this breakdown valid as long as the stock holds below 89. Chart 4 shows Chevron (CVX) hitting resistance from the May-July highs and MACD (5,35,5) moving below its signal line.
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Chart 3
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Chart 4
MARKET CARPET HIGHLIGHTS RECENT UTILITY LEADERS... Chartists can also use MarketCarpets to gauge sector and stock performance. Chart 5 shows the Sector Market Carpet in broad sector mode because the sector boxes are solid. You can toggle between the different levels by clicking the arrow at the top. The slider at the bottom can be used to change the date range. Over the last ten days, the utilities and industrials sectors are the best performers because they have the greenest boxes. Healthcare and energy are the worst performers.
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Chart 5
Chartists wishing to focus on one sector can double-click any symbol in that sector. From the broad sector view, it will take one double-click to get to the detailed sector view with individual stocks. From there, chartists can click then double click on any symbol. Hover over the Carpet and right click to see the show/hide ticker symbols option. The MarketCarpet will then expand to focus solely on the stocks in that sector. In this example, I am focusing on the utilities sector because it shows relative strength the last two weeks. Chart 6 shows the MarketCarpet in market-cap mode, which means the box size corresponds to the stock's weighting within the sector. Duke (DUK), Southern (SO) and Dominion (D) are the three biggest. Ameren (AEE) and NRG Energy (NRG) are the biggest gainers. You can learn more about MarketCarpet with our video tutorials
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Chart 6
UTILITIES SPDR HOLDS SHORT-TERM BREAKOUT... Chart 7 shows the Utilities SPDR (XLU) with a contracting range over the last six months. The ETF formed a lower high in late July and then a higher low in September. The upper and lower trend lines are converging to form a triangle. A break above the upper trend line would be bullish for the sector. Short-term I will be watching last week's Fed-induced breakout with the long white candlestick. Broken resistance turned first support and held with this week's bounce. A move back below Monday's low would suggest a failed breakout and put XLU back in bear mode. The indicator window shows the price relative edging higher the last two weeks, but trending lower over the last six months. This reflects short-term relative strength and long-term relative weakness.
