Sector Funds

These Sector Funds cover various sectors, which include Agriculture, Basic Materials, Biotech, Consumer Goods, Industrials, Health Care, Home Construction, Real Estate, Semiconductors, Technology, Telecommunication, and Water Resources. There are just as many Bear ETFs as there are Bull ETFs and leveraged as there are non-leveraged ETFs. There are plenty of options for you to decide how you want to trade a particular Sector.

Below, under “Comments, Analysis, and Recommendations”, I will write my comments for the Sector Funds giving you my chart analysis. I want to give you good evidence as to why I believe certain Sector Funds are heading higher or lower. I base my analysis on several technical tools. I use Exponential Moving Averages, Elliott Wave Analysis, Fibonacci, Japanese Candlestick patterns, trend lines, and support/resistance lines.

My goal is to provide you with the information needed so you can make the best trading decisions. My goal is also to help you to become profitable and most of all to help keep you from loosing a ton of money. I will provide you the potential price targets to take profits and stop loss levels to help preserve your trading capital in these Sector Funds.

Click on the desired Sector Funds link below to view the chart.

Comments, Analysis, and Recommendations

The overall market is down from their January highs, one would expect all the sectors that make up the U.S. Economy, and Market would be down in the same way. However, that is not the case. A few sectors have shown some relative strength verses the overall market. These would include the Pharmaceuticals, Healthcare, Biotech, and somewhat surprisingly, the Homebuilders. Look at the charts for PPW, XLV, XBI, and XHB.

The strongest of that group are the Biotech and Homebuilders sector. There are no five waves down to indicate that the trend has changed and turning down. The Pharmaceutical and Healthcare sectors are still above their 233 EMAs; however, the wave count is questionable. I will discuss that below along with others with the same set-up.

The big question to ask is how well the Biotech and Homebuilders can hold up if the overall market continues to decline from here. I need to watch these carefully to see if there are going to be higher or lower highs and lows in these sectors.

The weakest sectors have been the Telecom and Technology group. At one time, everybody thought these sectors would hold and even pull the economy around. Now they seem to be leading it down. There is a distinct Elliott Wave 5 waves down in this group to indicate the trend is down and lower lows are around the corner.

The Elliott Wave count is not clear in several of the sectors. In this group are the sectors that have only shown a three-wave decline. We do not know if this pattern is just a beginning to a bigger five-wave decline or a corrective wave indicating that higher prices are forthcoming. The funds that make up this group are the two mentioned above, PPW and XLV, along with IBB, ITB, IYH, IYK, IYM, IYR, RXL, and UGE.

There are two critical levels to watch that will help discern the most probable direction of the future price with this group. The most significant is the 2/2/10 high. A break above that level will eliminate the impulsive five-waves needed to signal lower prices.

A drop below the 2/5/10 low will be a warning of lower prices. The reason I say a warning is that it will not be a guarantee we will have a five-wave decline with a break of that level. Several of these funds have already crossed into the price action of the 1/29/10 lows. This overlapping is not a signature of impulsive waves unless it is the beginning of an extended wave three. The 2/2/10 high will be the level to watch.

For those funds with only three waves down so far and there is no overlapping, a break below the 2/5/10 low will signal a five-wave decline. This indicates the trend has changed and lower lows are coming.

Be a smart trader.

Craig Wells

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