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SP500 ​Sectors (SPY ETFs): The Good, the Bad and the Ugly?

  ​August 1 2016 ( From TradingView , SPDR.com  )


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SP500 ​Sectors (SPY ETFs): The Good, the Bad and the Ugly? $SPY   #xlk #xlf #xlv #xly #xli #xlp #xle #xlu #xlb #spy #sp500
XLK 
​Information Technology
Price (Left chart)
Relative Price (Sector over SPY Ratio - Right chart)​​
XLF
​Financials
​Price (Left chart)
Relative Price (Sector over SPY Ratio - Right chart)​​
XLV
​Health Care
​​Price (Left chart)
Relative Price (Sector over SPY Ratio - Right chart)​​
XLY
​Consumer Discretionary
​​​Price (Left chart)
Relative Price (Sector over SPY Ratio - Right chart)​​
XLI
​Industrials
​​​​​Price (Left chart)
Relative Price (Sector over SPY Ratio - Right chart)
XLP
​Consumer Staples
​​​​Price (Left chart)
Relative Price (Sector over SPY Ratio - Right chart)​​
XLE
​Energy
​​​​​​Price (Left chart)
Relative Price (Sector over SPY Ratio - Right chart)
XLU
​Utilities
​​​​​​​Price (Left chart)
Relative Price (Sector over SPY Ratio - Right chart)
XLB
​Materials
​​​​​​​​Price (Left chart)
Relative Price (Sector over SPY Ratio - Right chart)

Symbol        Description                   Dividend Yield             Price Technical           Relative Strength Technical
​​  SPY      SP500 SPDR                               1.96%                      Breakout
 ​ XLK     Technology SPDR                       1.71%                      Breakout                                  At Resistance
  XLF      Financials SPDR                         2.03%                      At Resistance                          Breakdown
  ​XLV      Health Care SPDR                      1.43%                      Strong                                      At Resistance
​​  XLY      Consumer Discretionary SPDR  1.37%                      Tiny Breakout                          Weak                         XLP      Consumer Staples SPDR            2.34%                      Failed Breakout                       Weak
  ​XLI       Industrials SPDR                        2.01%                      Tiny Breakout                           Range
  XLE      Energy SPDR                              2.85%                       Weak                                       Breakdown
  XLU     Utilities SPDR                             3.14%                      Breakout                                  At Support
  XLB     Materials SPDR                           1.93%                      At Resistance                          Compression



Investors having some problems finding the best exposure into those complacent markets
after reaching a new high ever on the SPY ETF ​last week and already into overbought zone.
Not only complacency create a difficult investment environment but also we have a quite 
​atypical bull market as most ​Central Banks ​​keeps buying financial assets at a rapid pace.

That bring a new low in yield in July 2016 for US Treasury Bonds. Investors have gone
​after yield in other segments of the market; starting to chase the dividend yield is often
​one of the places ​investors ​seek out in that chase for income. That is the main reason
we have that atypical bull market as defensive higher dividends stocks have outperformed
the usual high beta stocks in the rally.​​

​​​
​Let s have a look at different sectors​​​​ on a weekly basis in terms of price and relative
​performance vs the SP500 Index.


Looking at the table on the right side,​​ we must realize that the biggest three sectors
​(Technology, Financials and Health Care) make over 50% of the total asset mix for
a balance (index) portfolio​. 


The chart below explain the big picture in terms of sectors performance throughout ​the market cycle (Grey Line) and economic cycle ( Blue Line).  It is important to note that ​market trends ​usually anticipate economic trends by six to nine months. ​For more details: Intermarket Analysis – Profiting from Global Market Relationships by John J. Murphy (John Wiley & Sons, Inc., Hoboken, New Jersey, 2004
​​
SPY ETF
Weekly Chart - Candles


Financialiceberg.Com



And technically speaking, you will find in the table below a broad view of each sector in terms of Price and Relative price (ratio of each sector compare to the SP500; SPY ETF in our case). Also, find at the bottom each chart for each specific sector.
So because we are at late cycle in terms of market timing and investors cautiousness to avoid volatility, here is the strong and weak sectors technically speaking: 

Strong Sectors:

​​​XLK Technology SPDR (The Good)
- High​ beta sector for real bull players
- Lower US Dollar impact on earnings​ than the Industrials or Materials
- Strong Technicals: Breakout. Bulls need to protect the Breakout Trendline at all costs.

​​XLU Utilities SPDR
​- Highest Dividend yield at 3.14% will keep investors pouring money into that ETF vs some bond funds
- Low volatility price action sector​ - defensive play and late cycle best sector
- Very Strong Technicals

​​​​XLI Industrials SPDR
- Breakout in Price but range trading only on the relative basis vs SPY ETF
- Second ​most volatile sector ex commodities and oil​, another aggressive bull play

​XLY Consumer Discretionary SPDR

- Economy still growing and Consumers still upbeat on spending 
- Low oil price giving more discretionary money​ for consumers
- Technicals average: Tiny Breakout but relative behavior weak vs SPY ETF​

​​
Average Sectors:​ 

XLP Consumer Staples SPDR
- Dividend yield at 2.34% keep some interest from investors. Low volatility price action sector​ - defensive play
- Weak Technicals​: Failed Breakout and weak on a relative basis vs SPY

XLV Health Care SPDR
- Poor technicals in terms of relative price action (at ressistance)
- Low dividend yield at 1.43%​​​

​XLB Materials SPDR ​
- ​Global economy still weak and US Dollar will keep pressure on the sector​
- ​Technicals at Crossroads and may shift quickly as huge price compression will bring volatility soon

​​​​Weak Sectors:


​​​XLF Financials SPDR (The Bad)
- Margin under pressure since 2007 (flatter US yield curve and low yields will put tremendous pressure in 2016)​
- The most volatile sector ex commodities and oil​
- Technicals: At resistance price wise and very weak on a relative basis vs SPY ETF
​​
​​​XLE Energy SPDR (The Ugly)
- ​Most hated sector as Global economy still weak
- Technical Breakdown in play​​​ as we broke the support trendline on a relative basis

​​
Read also: ​ Sector Performance by Calendar Month

​​​