Friday, April 2, 2010

Industrial Sector Update: XLI at 2010 High

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Overview XLI is up +1.131% for the week, up +0.64% for the month, up +13.13% for the year, and up +104.69% since the March 9, 2009 market bottom. Very positive manufacturing data was released this week for the USA, Europe, China, and the World, so I am bullish on XLI.  In addition, the BLS March Employment Report was encouraging.  XLI has rallied since February 8. XLI is an Industrials ETF designed to represent the industrial sector of the S&P 500, which is 10.50% of the entire S&P 500. The industrials are varied, including aerospace and defense, building products, construction and engineering, electrical equipment, conglomerates, machinery, commercial services and supplies, air freight and logistics, airlines, marine, road and rail, and transportation infrastructure companies. See the XLI Industrials portfolio holdings here. Top 5 holdings currently are: General Electric, United Technologies, United Parcel Service, 3M, and Boeing, a total of 34.37% of the portfolio. This is a very popular and liquid ETF.

XLI Daily Chart Below is the XLI daily chart for 2010.

Noteworthy Closing Prices on daily chart below:
Current Close + 2010 YTD 4-1-10 High 31.44 (Highest yellow horizontal line)
Previous 2010 YTD 1-11-10 High 29.57 (Second highest yellow horizontal line)
YE 12-31-09 27.79 (Lowest yellow horizontal line)
10 Month EMA 28.06 (Third highest yellow horizontal line)


XLI: At 2010 YTD Closing High




Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, signalled a bull market for the XLI on March 9 (the 1 year anniversary of the bottom for XLI, btw). That is, the 25d sma is greater than the 50d sma. A bear market signal had been in effect since February 12, 2010.

Resistance The current closing price, the highest yellow horizontal line, is above any recent resistance.  XLI is trading in the late September 2008 area which could cause some longer term resistance in the 31.70 area.  XLI is also trading in the late 2005 and early 2006 price range.

Support There are multiple levels of support below, including the sideways trading in March. Most notable near term support is previous 2010 YTD of 29.57 on Janaury 11.

Moving Averages The 25d sma stopped descending on February 26 and bounced up. The 25d, 50d, 100d, and 200d sma's are all ascending. All the moving averages are being pulled upwards by the XLI 2010 YTD highs.

Uptrend Line The uptrend line, a rate of price ascent, is from the March 9,.2009 closing low of 15.36 up through the February 8, 2010 closing low of 26.90. The February 8 closing low has been the bottom of the 2010 pullback. XLI bounced above this trendline on February 9.

Downtrend Line A downtrend line, a rate of price descent, not shown, is from the October 9, 2007 all-time closing high of 41.90 down through the May 19, 2008 peak closing high of 39.72.  XLI is still well below this trendline.

Relative Strength Index (RSI)
RSI 14 day = 72.57 is overbought, but has been decreasing
RSI 28 day = 75.50 is overbought, but has been decreasing some
The RSIs are indicating overbought conditions, but are not unreasonable.

MACD (12,26,9) The MACD is now bearish, effective Wednesday, March 31.  The MACD had previously been bullish since February 16.

Long-Term Trend The third lowest yellow horizontal line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. The XLI is above this signal at the current close, the highest yellow horizontal line.

Conclusion XLI is at a 2010 YTD closing high. The RSIs are signalling overbought conditions, but are not unreasonable. MACD signalled bearish conditions on Tuesday, March 31.  I believe XLI will ultimately break through upside to new 2010 highs. Manufacturing and jobs data has been positive this past week.  Some consolidation trading could occur beforehand, as XLI is stair stepping upwards at a slow pace. The intermediate-term trend is bullish. The long-term trend remains bullish.


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