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How to Trade the Select Sector SPDR Funds

Written by: Richard Suttmeier 08/22/12 - 10:06 AM EDT
Tickers in this article: XLB XLP XLY XLI XLF

On Aug. 14 I advised readers to "Book Profits in Consumer Discretionary Stocks." XLY ($45.18) is trading between my annual pivot at $43.17 and my monthly and quarterly risky levels at $47.52 and $50.12, respectively. My semiannual value level lags at $39.91.

The consumer staples sector was 11.7% overvalued at the end of July and is 10.2% overvalued today.

My benchmark for this sector is the Consumer Staples Select Sector SPDR(XLP) , and its daily chart profile also shows overbought momentum. With XLP, we show that Tuesday was the "key reversal" day where the day's close was below Monday's low after setting a new multiyear high. On Aug. 6 I wrote "Book Profits in Overvalued Consumer Staples." XLP ($35.68) is trading between my annual and semiannual value levels at $32.87 and $31.34, respectively, and my monthly and quarterly risky levels at $36.06 and $37.64, respectively.

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The oils-energy sector was 9.2% undervalued at the end of July and is 1.4% undervalued today. My benchmark for this sector is the Energy Select Sector SPDR(XLE) , and its daily chart profile shows overbought momentum. On Aug. 1 I provided guidelines for Trading the Undervalued Energy Sector." XLE ($72.09) is above my monthly value level at $68.46, and this week's risky level is at $75.76.

The finance sector was 4.8% overvalued at the end of July and is 9.3% overvalued today. My benchmark for this sector is the Finance Select Sector SPDR Fund(XLF) , and its daily chart profile shows overbought momentum. On Aug. 15 I wrote "Time to Book Profits in Financial Stocks: Opinion." XLF ($15.22) is below quarterly and annual risky levels at $15.50 and $15.59, respectively, but I do not show a nearby value level.