Sectors Showing Strength

This week something like 27% of the S&P 500 report earnings. In the past week, I read numerous warnings that earnings will be below expectations. The S&P 500 pulled back 3% over the past six days, threatening to penetrate its 50-day moving average.

But what a difference a day makes. Yet once again, news comes out that the European fiscal crisis may be contained, this time by a possible bailout of
Spain. As Yogi Berra said “It’s déjà vu all over again”.

The latest sentiment indicators show the ‘Smart Money’ is 46% confident of a rally compared to 50% for the ‘Dumb Money’, nearly equal now. A few weeks ago the Smart Money was much less confident. I guess they are realizing there are only about ten weeks left to make enough additional profit to lock in their bonuses and gain reaffirmation their largest clients will stay with them for another year.

The DIA has the best looking chart of the major indexes and index ETFs. But what is catching my attention is how several of the sector ETFs look.

XLB for instance, the Materials sector ETF, is starting to show strong volume on up-close days.

XLB10.png

The XLB has only 13 years of history. However, it has a strong seasonal pattern. Over those 13 years, it has risen an average 8.1% over the next 7 weeks, with gains in every year. That takes us to just before December options expiration.

ST21.png

I recently mentioned the XLF is starting to show spirit. XLK, the Technology sector ETF, is starting to show more up-close days with high volume than
down-close days.

And I pointed out a few days ago that OIH was taking a break, possibly ready for a breakout. Tuesday’s breakout isn’t a record-setter, but I like the two
strong volume bars on recent up-close days.

DIH1.png

Hint: check out the top holdings of OIH. I won’t be highlighting these in today’s Seasonal Forecaster because they don’t have strong seasonal patterns to
back them up, but Schlumberger (SLB), Haliburton (HAL), and Seadrill (SDRL) charts show potential. Even Transocean (RIG) caught my attention – 18 days ago it had a large up-move on huge volume. Somebody with deep pockets suddenly took
an interest in the stock.

Of course there are many stocks with strong seasonal patterns and good looking charts. To find out more, click here: www.markettamer.com/newsletters

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2013 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg’s passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

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