ETFs

With the stock market at a new five-year high, MoneyShow’s Tom Aspray takes a technical look at the top-performing sectors for potential buy candidates should the market pull back in February.

As January 2013 draws to a close, five of the Select Sector SPDR ETFs have outperformed the S&P 500 by at least 1%. In such a short time this is pretty impressive but it has been quite a month for stocks and they are now getting more attention from investors.

Though the close above 1,500 in the S&P 500 is positive for the intermediate term, I am now becoming more cautious on the stock market as I discussed last Friday. The seasonal tendency is for stocks to have a correction in February, and now that everyone seems to be arguing the bullish case, the risk is much higher.

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In the current environment, one has to be a very selective and patient buyer with a focus on risk. The Select Spyder Sector performance table shows that of the top five performers so far in 2013, all except the Select Sector SPDR Energy (XLE) were on December’s Best Sector Bets list for 2013.

Two of the top performers from 2012 the Select Sector SPDR Financial (XLF) and the Select Sector SPDR Consumer Discretionary (XLY), are also doing well so far in 2013 up 6.6% and 7.3% respectively. One of my favorites for most of 2012, the Select Sector SPDR Health Care (XLV) was down 0.6% in the 4th quarter of 2012 but is up 7.4% so far in 2013.

The best performer so far in 2013 has been the Select Sector SPDR Energy (XLE), which has closed higher 10 out of the last 11 days and is up 7.7 % in January. Though we have not had a setback to buy XLE we have several oil stocks in our portfolio. Let’s look at the weekly analysis of the top sectors to see which look like the best buys after a correction.

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Chart Analysis: The weekly chart of the Select Sector SPDR Consumer Discretionary (XLY) show the strong close last week that was at the daily starc+ band.

  • XLY is now not far below the weekly starc+ band at $51.50 while the monthly is at $53.07.

  • Two weeks ago XLY closed above the trend line resistance at line b at $49.70.

  • The relative performance dropped back to test its uptrend, line d, and its WMA in late December.

  • The RS line has now made new rally highs, which confirmed the breakout above resistance (line c) last October.

  • The weekly OBV has just broken through its resistance, line e, which also confirms the price action.

  • First good support at $49 to $49.16, which corresponds to the 20-week EMA and the early 2013 highs. Further support will be in the $48-$48.40 area.

The Select Sector SPDR Industrial (XLI) is up 6.8% since the start of the year and the weekly chart shows the breakout above resistance, line h, at the start of the New Year.

  • The close was just below the weekly starc+ band at $40.73 with the monthly at $42.21, which is close to the long-term resistance at line g.

  • The completion of the recent trading range has upside targets in the $43 area.

  • The relative performance has just broken its downtrend, line i, as it has been above its WMA since the end of October.

  • The on-balance volume (OBV) has been in an uptrend since the 2011 lows, line i, and has just made marginal new highs.

  • The rising 20-day EMA is at $39.29 with further support in the $38.60 area.

  • The 20-week EMA is at $37.77 with the quarterly pivot is at $37.64.

  • The late December low was $37.04, which just missed our buy level at $37.02

NEXT PAGE: Two More Top-Performing Sectors

Tickers Mentioned: Tickers: XLE, XLF, XLY, XLV, XLB