This is a good time to step back and gain some perspective on the key ETFs I follow as the market anticipates several economic happenings, such as:
- Lower interest rates
- Lower inflation
- Weaker dollar
- Weaker labor market
- Growth leading
I start with the Transportation Sector ETF (NYSEARCA: IYT) looking at the weekly chart.
When I step it back, it looks weaker than the growth stocks, however, the chart suggests nothing more than noise right now.
The Transportation Sector ETF (IYT) is in a weekly bullish phase, underperforms the benchmark and the momentum is waning but not critical.
If we compare IYT to the Semiconductors Sector ETF (NASDAQ: SMH), we see:
We see a test of the all-time highs. The Semiconductor Sector ETF (SMH) far outperforms the S&P 500 ETF (SPY) and momentum is good but not amazing.
The point is, we continue to watch for more signs that SMH can keep the party going for everyone else.
Meanwhile, looking at everyone else..
The Retail Sector ETF (XRT) is merely having an inside week meaning that this week’s range thus far is within last week’s trading range.
Same is true with Russell 2000 (IWM).
What can we make of that?
More bullish than anything else as both are holding up. Both are outperforming the SPY. And both have good momentum.
Although, I would watch XRT as she has a bit of a sell mean reversion.
The Biotechnology Sector (IBB) and the Regional Banks (KRE) are also both trading within last week’s range.
With SMH so decisive and everyone a bit indecisive but still in good shape, we now have price indicators to watch for.
Either IWM, XRT, KRE, IBB break out above last week’s range and continue to rally..OR
They fail the lows of last week’s range and take a trip closer to the underlying support near the 50-week moving averages (blue lines).
SMH has done her thing.
I would assume, based on past performance when the market rotates back to growth, that SMH will hang tough unless the rest of the ETFs falter.
We also must watch that SMH does not begin to look like a double top.
To sum up:
- SMH is strong and decisive
- Other ETFs are indecisive but holding up
- Rotation back to growth favors SMH—unless others falter
- Need to watch if SMH risks forming a double top
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
