Tuesday, April 20, 2010

XLI (S&P 500 Industrials Sector): Onwards & Upwards!

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Overview
XLI is up +0.97% for the week, up +3.71% for the month, up +16.59% for the year, and up +110.94% since the March 9, 2009 market bottom. Very positive manufacturing data has been released in the past few weeks 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.

The Conference Board Leading Economic Index
On Monday, April 19, TCB issued its March LEI for the USA, as noted in my previous post.  The March LEI was up a very postive +1.4% to an all-time high of 109.6.  This economic metric is very encouraging for USA equities and for the industrials sector in particular, e.g. XLI.

XLI ETF & Portfolion  Holdings
XLI is an Industrials ETF designed to represent the industrial sector of the S&P 500, which is 10.55% 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 10 holdings currently are: General Electric, United Technologies, United Parcel Service, 3M, Boeing, Caterpillar, Union Pacific, Emerson Electric, Honeywell, General Dynamics, a total of 50.76% 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 32.40 (Highest yellow horizontal line)
2010 YTD 4-15-10 High 32.62
10 Month EMA 28.23 (Mieele yellow horizontal line)
YE 12-31-09 27.79 (Lowest yellow horizontal line)


XLI: Just Below 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 previously been in effect since February 12, 2010.

Resistance
The current closing price, the highest yellow horizontal line, is just below the 2010 YTD high of 32.62 set on April 15, which is recent resistance. XLI is trading in the middle of the September 2008 sideways trading range.  Possible long term resistance could be the 32.58 dip on 7-15-08.  XLI is also trading in the July, August, September 2006 (plus early 2006) area.  There is even more price history back in 2001 and 2000.

Support
There are multiple levels of support below, including the Monday low of 32.03.  Other notable near term support is the previous 2010 YTD of 29.57 on January 11.  There is long term support back in August and September 2006.

Moving Averages
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 was the bottom of the 2010 pullback. XLI bounced above this trendline on February 9 and has remained above.

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 below this trendline, which is now in the 33.50 area.

Relative Strength Index (RSI)
RSI 14 day = 67.01 is reasonble; the recent selloff pulled the RSI down from overbought conditions
RSI 28 day = 72.59 is marginally overbought, but not unreasonable
The RSIs are reasonable and indicating XLI can go higher.

MACD (12,26,9)
The MACD became bearish on Monday, April 19 due to the selloff, but is basically neutral.

Long-Term Trend
The middle 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
USA & World industrial, jobs, & GDP data are indicating economic growth, which is bullish for XLI.  XLI is just below the 2010 YTD closing high. The RSIs are reasonable and the MACD is basically neutral.  XLI will ultimately break through upside to yet more new 2010 highs. Ongoing consolidation trading and mild pullbacks will occur as XLI stair steps upwards at a slow pace. The intermediate-term trend is bullish. The long-term trend remains bullish.

Disclosure
We have a long position in XLI.


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Seeking Alpha