This is a look ahead at all of the main sectors in the market. These will include consumer discretionary XLY, consumer staples XLP, energy XLE, financials XLF, healthcare XLV, industrials XLI, information technology XLK, materials XLB, telecommunication services XYL, and utilities XLU.
I am also going to throw in biotechnology IBB, homebuilders XHB, construction builders ITB, real estate IYR, retail XRT, and a couple more.
You can see below how they performed this past year.
Consumer Discretionary XLY
XLY looks like it has broken out and pulled back to old resistance which should now be support. This would normally be a bullish setup, however I believe that the overall market is well extended and expecting to at least see a pullback back to the pre-election levels.
Consumer Staples XLP
Consumer staples has given back most of the gains that were made in 2016. With the sector as a whole under the 20 and 40 week MA I am inclined to sell XLP stocks until this reclaims those levels. I have a feeling during this pullback in the overall market to start the year that XLP will break below the November lows and make a lower low.
Energy is coming down. I think XLE is going to get killed here and will be seeing 70 soon. XLE is a sell. It bounced back to the 200 week MA and it should stop here. Down we go.
The financials were bullish…2 months ago! They are not in the intermediate term at all. In fact the XLF looks rather Bearish in my eyes. I believe that you will be seeing 20-21 in the XLF and that will be a buying spot with minimal downside risk. Don’t buy this up here, you will be an immediate loser.
Healthcare have had monster runs since 2013 and topped in the middle of 2015. I can see healthcare going 1 or two ways here. XLV needs to get back above 71 and I think it could be a market leader, however if it is below this it is guilty until proven otherwise. XLV better hold 65 or it will be testing the flash crash lows.
XLI is coming down. the W bottom measured move was hit at 64 and now it is time for this to pull in. Looks gross. I would not buy XLI until it comes back down and touch 59.
Technology put in an outside week and is overdone. With the QQQ and Nasdaq not particularly thrilled about breaking out, I believe that XLK will get hit pretty hard. I think XLK pulls back to start the year and I honestly believe that it will drop the Election support around 46.
Materials have not broken out to new rallies on this Trump trade which means I don’t think its going to make new highs soon. I see XLB coming back to the 200 week Ma before attempting the all time highs again.
THIS. IS. A. TOP. The telecom etc topped this year in my opinion. Big time topping tail on the weekly chart in december and this is coming back down to 63 in my opinion. If that doesn’t hold, look out below to 58.
When the market pulls in XLU is normally a place many investors will run to gather the good dividends. Since I am bearish the overall market right now I see XLU running if it can hold over 48 for the first few weeks of January. If it cannot hold 48 then it may pull all the way in to 44-45 to touch support. It really is in the middle of no man’s land here so I wouldn’t be looking to buy this here.
I believe that IBB is one of the sectors to own in 2017. Sure there may be one more low to be had but if this can close over 275 in the first couple of weeks then I believe you will see over 300 before new lows. 275 is the price point to watch. If it’s below stay away if it’s above you are long.
the XHB has topped. A gigantic rolling top. Look at the move from 2012 and the consolidation during 2013 and 2014. Now look at the breakout and rollover in 2015. I expect the homebuilders to give up the important 33 level and test 31. If the XHB drop 31 I believe you are going to see another housing bear market targeting 20 on the XHB.
Real Estate and the IYR look exactly the same to me as above. Sure it can bounce off the 200 week Ma and make new highs, or (which I believe) it will break this 73 level and test 66, then 62, and likely 48 before it is all said and done. I am very bearish housing in 2017.
The ITB hit new highs in 2016 unlike the XHB. I think the ITB will be pulled down by the other parts of the housing sector and will likely pull in and test 25. If the housing sector rolls over then I believe that ITB can test 22 and if it drops 22 then 15-18 come into play.
Retail is testing the 200 wee MA right now. If it holds it you should be mega long XRT. If it drops this level then you will be seeing 32. Big inflection point here.
This is the chart I love. Very bullish XPH in 2017. this has pulled in over 30% from the bubble high in 2015, and now it is time to bottom. It bottomed in November and I am expecting a reversal here. With a negative RSI divergence and another hold of the 37 level one has very little risk to the downside for MAXIMUM reward to the upside. I want to see XPH rip up at the start of the year and test 47-48, go sideways for a few weeks and hold 45 and then continue into the 50’s. There is big opportunity here in my opinion.
Semiconductors just topped in 2016 for the foreseeable future. Stay away. I see a move down to under 65 in the near future.
Metals and Mining
This is also one of my favorite plays into the next year. It has test the 200 week MA and now I want this to go sideways and break this average. If this breaks 33 I believe you will be seeing 45 in 2017. I am very bullish metals in 2017.
Looking at the Charts, what do I think is DISCOUNTED heading into 2017?
Healthcare, Biotech, Pharmaceuticals, and Metals and Mining.
What I like in order:
- Metals and Mining
What do I NOT like in order:
- Telecommunication Services
- Housing and Industrials