Bottom ahead?/Sector ETF highlights
The market wasted no time resuming its downtrend last week, leaving the weekly trend analysis of major indices and industry sector ETFs awash in red – confirming that a significant downtrend is underway. That said, the nature of the decline so far – fast and steep – has set up oversold conditions from which a good intermediate-term rally could develop.
While such a rally could occur at any time (it’s possible Thursday’s lows might even mark a short-term bottom), it makes sense to think that the market may first continue lower to the next potential downside support levels. These appear to be about 10600-10700 for the DJIA, 2025-2050 for the NASDAQ, and 1220-1230 on the S&P500.
Sector ETF highlights
Of the nine sector ETFs I follow on the trend analysis page, the Utilities Sector SPDR (XLU) is currently the only ETF with a completely positive trend spectrum:
Runner-up is the the Consumer Staples Sector SPDR (XLP), which is mixed but still positive on balance:
Although still showing a negative trend analysis overall, the Health Care Sector SPDR (XLV) looks like it could be bottoming:
The Technology Sector SPDR (XLK) remains by far the worst performing of all the sector ETFs:
New positions
Anheuser Busch (BUD) – Last week I sold some June 45-strike puts on BUD as it dipped back down to the 45 level after trading at 47 a couple of weeks ago:
The stock has been showing strength recently and looks like it could work higher over the intermediate term. In any case, as always, I won’t mind owning the stock if it’s put to me.
Watchlist
It’s no surprise that the “upside strength” scans this week turned up only a few stocks of interest. These include Colgate Palmolive (CL), Disney (DIS), Entergy (ETR), General Mills (GIS), Johnson & Johnson (JNJ), Tribune (TRB), UST (UST), and Waste Management (WMI).
On the other hand, a lot of increasingly tempting put-selling opportunities are appearing on the “oversold” scans. In addition to those already mentioned here in the last couple of weeks, new stocks of interest this week include Freeport McMoran (FCX), Koninklijke Philips Electronics (PHG), Saint Jude Medical (STJ), Scotts Miracle-Gro (SMG), and Weyerhaeuser (WY).
