Why I Liked This ETF On The Dip

The stock market correction that started last Thursday has picked up steam as the market bears are getting louder once more as a couple of new layers have been added to the wall of worry. The upcoming Brexit vote does have a chance of rocking the boat temporarily but the longer term measures of the A/D line do not suggest that a vote related drop will complete a major top.

Of course the high number of bear market forecasts is positive as it should provide fuel for a rally. It is interesting that a four day pullback and 2% decline has stimulated this degree of bearishness. The market is now less overbought as the NYSE McClellan Oscillator has dropped from +141 last week to -208 Tuesday as I Tweeted earlier this morning.

The Spyder Trust (SPY) has pulled back to good support as it dropped below the monthly pivot at $207.77 before closing above it. This widely watched market tracking ETF formed a doji Tuesday and a close above $208.74 will trigger a positive momentum shift. I am still look for Spyder Trust (SPY ) to reach the quarterly pivot resistance at $214.58 with additional targets in the $218-$220 area.

One ETF that has been leading the Spyder Trust (SPY) higher all year is the Materials Sector Select (XLB) as it is up 8.3% YTD and is up over 29% from the lows early in the year. In contrast the SPY is up 2.6% YTD and 15.5% from the year’s low.

In last week’s “Why Didn’t I Buy This Mining ETF?” I explained why I was not ready to buy the SPDR S&P Metals & Mining ETF (XME) because the risk was too high. This meant that the correction needed to be watched. The situation was different for the Materials Sector Select (XLB) as the analysis of the weekly and daily technical studies demonstrate why I favored buying it on the recent dip.

http://www.forbes.com/sites/tomaspray/2016/06/15/why-i-liked-this-etf-on-the-dip/