One of the noteworthy developments in recent days has been the move in defensive stocks. Defensive sectors, which still offer a higher yield than the overall market, although the gap between their yields and the 10-year’s has narrowed significantly, if not completely. Yield on the 10-year Treasury note closed higher at 3 percent, a key psychological level the benchmark for the first time since late April. While the Utilities Select Sector SPDR ETF (XLU) has yield of 3.48%. XLU fell 0.7 percent Wednesday, bringing its MTD lost up to 3.8 percent, underperformed the S&P by a wide margin. Now the question is whether recent selloff is a beginning of an end or there’re more pains ahead? Below is an update look at a trade in XLU.
The graphic below is from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges. As shown, the underlying is in a short-term bullish trend when the price bars are painted in green. The underlying is in a short-term bearish trend when the price bars are painted in red.
Chart 1.1 – Utilities Select Sector SPDR ETF (weekly)
Our “U.S. Market Trading Map” painted XLU bars in red (sell) – see area ‘A’ in the chart. The first dominant feature on the chart is the rising trend line starting in 2009. The second dominant feature of the chart is the downward trend since late 2017. The early May selloff pushed the ETF below the early 2018 rising trend lines, signify…Click here to read more.
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