CONSUMER STAPLES SPDR MINDS THE GAP -- EQUAL-WEIGHT CONSUMER STAPLES ETF HITS NEW HIGH -- TECHNOLOGY SPDR LAGS ITS EQUAL-WEIGHT COUNTERPART -- PG CHALLENGES RESISTANCE ZONE -- ENERGY SPDR CONSOLIDATES NEAR HIGHS -- XOM AND CVX HIT RESISTANCE ZONES
CONSUMER STAPLES SPDR MINDS THE GAP ... Link for today's video. The Consumer Staples SPDR (XLP) extended its advance with a gap up in early March and an approach to the 2013 highs. Chart 1 shows XLP plunging below support in late January and rebounding sharply in February to recapture this support break. Perhaps this support break was a massive overshoot. Overall, chartists can make the case for an uptrend because the ETF is within a few percent of its high. Short-term, I would watch the early March gap for signs of a reversal. A move below 42 would fill the gap zone and turn this continuation gap into an exhaustion gap, which is short-term bearish. The indicator window shows the price relative (XLP:$SPX ratio) falling over the last eleven months. This can be expected when the S&P 500 is in an uptrend. XLP has lower volatility and lower risk than the S&P 500. As such, it usually underperforms when the S&P 500 is in an uptrend. In other words, the advance in XLP is less than the advance in the S&P 500. During broad market declines, XLP usually falls at a lesser rate than the S&P 500 and outperforms.
(click to view a live version of this chart)
Chart 1
EQUAL-WEIGHT CONSUMER STAPLES ETF HITS NEW HIGH... When analyzing a sector, chartists should look at the sector SPDR and the equal-weight sector ETF. The sector SPDR reflects performance for the large-cap stocks in the sector. The equal-weight sector ETF shows what is happening with the average stock. Chart 2 shows the Equal-weight Consumer Staples ETF (RHS) falling in January as well, but finding support near broken resistance and surging to a new high in late February. Even though the ETF may be overbought after a 9% run the last five weeks, the new high affirms the bigger uptrend and suggests that the average consumer staple stock is also in an uptrend. Broken resistance in the 90 area turns first support to watch on a throwback.
(click to view a live version of this chart)
Chart 2
PG CHALLENGES RESISTANCE ZONE... As you can see from the XLP chart above, the top ten components account for over 60% of the ETF's weightings. Talk about lopsided. This means traders and investors should watch the top components for real clues on ETF direction. Chart 3 shows Procter & Gamble (PG), which is the biggest component, edging higher the last four days and making a breakout attempt. PG broke above the late February highs and is now challenging the resistance zone from the mid-late February highs. The indicator window shows the MACD Histogram in positive territory since the second week of February. Momentum favors the bulls as long as this histogram is positive, which means MACD is above its signal line.
(click to view a live version of this chart)
Chart 3
TECHNOLOGY SPDR LAGS ITS EQUAL-WEIGHT COUNTERPART... The two PerfCharts below compare the nine sector SPDRs with the nine equal weight sector ETFs. Chart 4 shows the SPDRs with the Materials SPDR (XLB) sporting the biggest gain (11.02%) over the last five weeks. Chart 5 shows the equal-weight sector ETFs with the Equal-Weight Consumer Discretionary ETF (RCD) sporting the biggest gain (+11%). Further, notice that the Equal-weight Technology ETF (RYT) is leading the Technology SPDR (XLK) with a bigger gain. Similarly, the Utilities SPDR (XLU) is lagging the Equal-weight Utilities ETF (RYU) because it has a smaller gain.
(click to view a live version of this chart)
Chart 4
(click to view a live version of this chart)
Chart 5
ENERGY SPDR CONSOLIDATES NEAR HIGHS... The Energy SPDR (XLE) had a good run in February and is now consolidating near the 2013 high. Chart 6 shows XLE breaking alleged support and then moving right back above this break. Admittedly, support and resistance levels are sometimes imprecise for indices and ETFs with dozens of moving parts (components). With XLE near its highs, the overall trend is up and a bullish consolidation pattern is taking shape. The pennant represents a rest after the big advance, and a break above pennant resistance would signal a continuation higher. Chart 7 shows the Equal-weight Energy ETF (RYE) recording a new 52-week high and affirming its uptrend this month.
(click to view a live version of this chart)
Chart 6
(click to view a live version of this chart)
Chart 7
XOM AND CVX HIT RESISTANCE ZONES... Even though XLE has a bullish continuation pattern working, its top two stocks could be forming lower highs and turning down near key retracements. As the chart above showed, the top two components account for almost 29% of the ETF. Exxon Mobil (XOM) and Chevron (CVX) are also very similar companies (major integrated oil). Chart 8 shows XOM falling sharply in January and bouncing in February. This bounce retraced around 62% of the prior decline and the stock gapped down from the retracement last week. This gap is holding so far and the stock is moving sharply lower again on Tuesday.
(click to view a live version of this chart)
Chart 8
Chart 9 shows CVX plunging in January and rebounding in February with a 52% retracement. Broken support turned into resistance in the 117 area and the stock stalled out just below this level over the last two weeks. Notice the large spinning top in late February and the hanging man on Monday. The spinning top signals indecision and the hanging man is a bearish reversal pattern. The stock fell sharply on Tuesday and a support break at 114 would signal a continuation of the January decline. Breakdowns in XOM and CVS would be negative for the Energy SPDR.
