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ETF Action: Three to Buy and Three to Dump


Staples stocks are trending nicely, but retail stocks are looking risky.

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.
Back on April 17 I posted [subscription required] on the Buzz & Banter about a lot of energy and industrial names popping up, and I mentioned a theme that the market is entering into the "late cycle" of this bull run.  I mentioned it again on April 23 [subscription required] on the Buzz & Banter, and at other times as well.  If you look at the updated charts, it is apparent that this is playing out. Furthermore, I expect these trends to be a year-long theme. I anticipate that the energy, industrials and staples stocks continue to outperform while utilities, retail and bank stocks underperform.

Banks (represented by the SPDR KBW Bank ETF (NYSEARCA:KBE) have broken the downtrend and seem to be hovering right around the 200-day moving average.  If I were looking at this in a vacuum, I would say you could make a trade toward the 50-day moving average if you "had" to, but I see better opportunities elsewhere.  I would prefer to see some healing in this sector rather than forcing a trade.

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Industrials (represented by the Sector Spdr Trust Sbi (NYSEARCA:XLI) -- nothing wrong with this one as it hit new highs and is trending very nicely.

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Energy (represented by the Energy Select Sector SPDR ETF (NYSEARCA:XLE) -- same thing here: Stick with the trend and the things that are making new highs, especially as the market is in late cycle.

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Utilities (represented by the Utilities SPDR ETF (NYSEARCA:XLU) -- no new highs, but bounced nicely; nothing great here, but not totally breaking down yet, either.

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Staples (represented by the Consumer Staples Select Sector SPDR ETF (NYSEARCA:XLP) -- what's not to love?

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Retail (represented by the SPDR S&P Retail ETF (NYSEARCA:XRT) -- not so good.  Might even get a negative moving average cross.  I am avoiding this one.

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