It looks like we could finally have lift off. For a sustainable bull market, that is.
What does it take to create a sustainable bull market? As I often say, it has always been seeing six or seven sectors of the 11 making a bullish pattern -- with a high percentage of the stocks in those sectors rallying. It seem we have that now.
Let's review the 11 sectors to see which are pointed to the sky.
High Energy
In this daily bar chart of the Energy Select Sector SPDR Fund ( XLE) , below, I see it among those sectors that are going to power the broad market averages higher. Notice the rising 200-day moving average line. The improving On-Balance-Volume (OBV) line and the upturn in the Moving Average Convergence Divergence (MACD) oscillator.
Low Finance
In this daily bar chart of the financial services exchange-traded fund ( XLF) , below, however, I do not see a positive setup. The slope of the 200-day moving average line is still negative. The on balance volume, or OBV, line shows weakness as does the Moving Average Convergence Divergence (MACD) oscillator.
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Higher Tech
In this third daily bar chart I see a different story with the technology sector ETF ( XLK) below. The slope of the 200-day moving average has finally turned positive after seeing the OBV line rise for months.
Good Health
In this next sector chart I show the healthcare sector, the ( XLV) . Here, too, I see a positive setup.
Utility at a Balance
The utility sector fund ( XLU) , below shows a picture that is neutral, with a flat 200-day moving average line.
Industrials Building a Bridge
The industrial sector is represented by the Industrial Select Sector SPDR Fund ( XLI) , below, and here I see that prices dipped toward the rising 200-day moving average line in March and turned back upward.
Consumer Discretion Is Advised
In this chart below I review the the consumer discretionary sector ETF ( XLY) , below, in which I fail to see a good setup just yet. The 200-day moving average line is just turning flat and the OBV line and the MACD oscillator are not displaying strength. This would be a sector to underweight for now.
Material Changes Ahead
I believe we -- the entire world -- are embarking on a decade of shortages and material stocks should benefit greatly, as price is used to allocate resources. The Materials Select Sector SPDR Fund ( XLB) has a chart that is just getting started on the upside.
We had some breaks of the 200-day line, but now the slope of the line has turned up and it is early in the game. The first inning. The heavier trading volume in mid-March tells me that investors who are smarter than I am were buying. Let's join them now.
Sturdy Staples
The ninth ETF is the consumer staples fund ( XLP) . This chart shows all three indicators in gear -- a rising 200-day moving average line plus a rising OBV line and the MACD oscillator above zero.
Real Estate Not on Strong Foundation
Real estate. What would you expect?
The chart of the Real Estate Select Sector SPDR Fund ( XLRE) , below, reveals no reason to be a buyer yet. Prices trade below the declining 200-day moving average line. The OBV line lacks strength and so does the MACD oscillator. A definite avoid or, if you believe it is due for a rebound, only underweight it.
Communications Tell a Good Story
Finishing on an uptick is the communications services ETF ( XLC) . The strong and rising OBV line and the heavier volume in mid-March were tells.
Bottom-Line Strategy
Over the past several months, I have written hundreds of stories about individual stocks. I found some basing and poised to make a recovery rally and many others still searching for a bottom. Now the status of the market has changed and we should expect to see more bullish stories with potential bigger upside price targets. Not all sectors have turned upward, however, so you still need to be selective. I wished I had spotted this earlier, but I feel good in being early at the top. Calling the market is easy, but getting to answer is hard.
