Over the last month, the S&P 500 SPDR (ARCA:SPY) exchange-traded fund (ETF) is up 2.23% from $140.77 on August 13 to $143.91 on September 11. Certain sectors are always outperforming or under-performing the S&P 500 benchmark, and over the last month there have been four clear, outperforming leaders. The continued strength or weakness of these sectors can be determined by the technical outlook of their respective ETFs.
The SPDR S&P Retail (ARCA:XRT) ETF is up 5.4% over the last month from $59.96 to $63.20 (September 11). From the end of June and onwards, the ETF has been in an upswing, recently making a new 52-week high on September 10 at $63.76. This is actually the highest level the ETF has been going back to its inception in 2007. Therefore, there is no overhead resistance, but a long-term trend channel can be used to project an upside target. Drawing a trendline along the price peaks since 2010, the line intersects near $67.50. Therefore, $67.50 provides a reasonable upside target and an area where the ETF may encounter difficulty moving higher. Short-term support is at $60, with a drop below indicating a move to $57.50. Major support is at $56 followed by trendline support - going back to 2008 - at $55. If the price drops below $56 and $55 it signals a major change in direction.
SEE: Support & Resistance Basics
The Financial Select Sector SPDR (ARCA:XLF) ETF is up 4.88% over the last month, from $14.95 to $15.68. Back in March and April, $16 was a stiff resistance area and ultimately the ETF will need to rise passed that level to continue an advance. If it does, there is still lots of overhead resistance as the ETF peaked twice just above $17 in April 2010 and February 2011. With the short-term trend higher, hitting those levels is possible but the ETF needs to get above $17.25 to signal a long-term upside breakout out. Support is at $15 provided by the trendline, which began in June. Additional support is at $14.50 and $13.30 - the June low.
The Consumer Discreet Select Sector SPDR (ARCA:XLY) ETF is up 4.59% over the last month, from $44.64 to $46.69. The ETF is a long-term uptrend going back to 2009, and recently made a new 52-week high at $46.98 on September 10. The long-term trend channel provides an upside target of $48.25, at which point the price is likely to meet selling interest. Nearest support is $44.80, with a drop below indicating a further slide towards support at $43, $42.40 or $41.40. The long-term trendline provides support at $40.
SEE: Interpreting Support And Resistance Zones
The Materials Select Sector SPDR (ARCA:XLB) ETF has had a choppier path, but it's up 3.23% over the last month, from $35.86 to $37.02. The ETF is currently pushing towards resistance at $38, a mark which proved difficult to surpass through early 2012. If the ETF can surpass $38 it indicates the uptrend that began in October of 2011 is likely to continue. In early to mid-2011 the ETF made multiple peaks between $40.70 and $41.28, which will once again be a resistance area if a push higher continues. Support is at $35 and a drop below that draws the short-term uptrend into question. Support is also present between $33.60 and $32.60, with a drop beyond the latter indicating a longer-term trend reversal.
The Bottom Line
The sectors that lead the market change constantly, but right now these four have been leading the charge higher over the last month. All four sector ETFs have room to the upside, although the Financial and Materials sector ETFs are facing some significant overhead resistance. The Retail and Consumer Discreet ETFs are in strong long-term uptrends. Trends can change though, and while the short-term prospects look good for the bulls, support levels should always be monitored; if the price starts moving through support levels it could indicate an overall change in the direction of the ETF, and the stocks represented by that sector.
Charts courtesy of stockcharts.com
At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.