End of January ETF Sector Rotation Grid Planning

As January 2014 comes to a close, let’s update our “Sector Rotation” planning grid using the main 9 AMEX Sector SPDRs arranged by the Sector Rotation Model.

We’ll start with a grid from TradeStation showing price and the 200 day SMA:

We’ll take a look specifically at the Sector ETFs in the charts below, but I wanted to focus our attention first on the current price and the rising (or falling) 200 day Simple Moving Average (SMA).

Of the 9 major AMEX Sector ETFs, Six Sectors trade clearly/clanly above their rising 200 day SMA (XLF, XLY, XLK, XLI, XLB, and XLV), One Sector trades into the support of the rising 200 day SMA (XLE), One Sector just broke above the 200 day SMA (XLU), and One Sector currently trades underneath its 200d SMA (XLP).

Using this simple metric as a relative strength measure, we see ongoing weakness in Staples (XLP) and Energy (XLE) along with Utilitites (XLU).

The Utilities Sector has been an under-performer throughout 2013.

The next set of charts show additional detail beyond the price and moving averages:

While all sectors rose sharply in 2013 along with the broader market, Utilities was the Relative Strength laggard (XLU) while Health Care (XLV), Industrials (XLI), Materials (XLB), Consumer Discretionary/Retail (XLY), and Energy (XLE) all shows persistent, strong uptrends.

See the end-of-year update for 2013 for additional insights on Sector ETF performance and insights.

Beyond the larger trends of the ETFs, let’s focus our attention now on the recent retracement activity:

From a price standpoint, XLP Staples has been a relative strength laggard because this was the only index NOT to break above its end-of-2013 price high recently.

While all ETFs declined in 2014, one index stands apart from the others – it’s the defensive Utilities sector which is visually positive on the year followed by its defensive companion Health Care which was strong throughout 2013.

All other sectors show visual declines for 2014 with Consumer Discretionary/Retail declining the most so far in 2014.

Continue to focus on the “Offensive/Bullish” Sectors (XLF, XLY, XLK, XLI, XLB) against the traditionally “Defensive/Bearish” Sectors (XLP, XLV, and XLU).

Corey Rosenbloom, CMT
Afraid to Trade.com

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