Will The Top Sector ETFs Continue To Lead?

It has been a great month for the stock market as the “bubble fear” is already emerging just ahead of the Thanksgiving holiday. In terms of the sector ETF, it has been quite a race in terms of performance as we approach the end of the month.

After the close, we get the earnings from the top-performing stock of the year, NVIDIA
NVDA

DIA
Corp (NVDA). The high so far this week was $505.48 which is above the August 2023 high of $502.62.

The weekly and daily technical studies are positive for NVDA with no divergences or signs yet of a top. However, NVDA is extended on the upside as it is 6.3% above its 20-day EMA. That increases the odds of a pullback to the 20-day EMA at $470.53 as NVDA was over 7% below it in late October. Just last week it was over 7.25% above its WMA.

In terms of the SPDR Sector ETFs, the Technology Sector (XLK
XLK
) is leading the way this month up over 12% with the Consumer Discretionary (XLY
XLY
) as it is up 10.45%. They are closely followed by the Real Estate Sector (XLRE
XLRE
) as it is up 10.32%.

Looking at the monthly performance of XLK going back to 2015, XLK has had monthly gains of over 10% only 6 times out of past 106 months. The largest gain of 13.7% came in April 2020 as XLK rebounded from the Covid low.

The daily chart of XLK shows a strong close on Monday as once again the high was very close to the daily starc+ band. The trading range, lines a and b, was completed on November 6^th. XLK is 4% above the 20-day EMA at $176.55 while the September high was $177.38.

The daily relative performance (RS) moved above the resistance at line c, at the start of November which indicated it was again a market leader. It is still acting strong as it is well above its rising WMA. The on-balance-volume (OBV) made a new high for the year in October as it was leading prices higher. As XLK was making a new correction low on October 26^th, the OBV was making a higher low, line d. This bullish divergence was a strong reason to be long XLK.

The weekly and daily advance/decline analysis remains positive and is likely to stay positive even if we get a 1-3% market pullback. It should set up another good risk/reward entry for those who are patient.

Editor’s Note: NVDA just released earnings as they reported better than expected earnings and revenues but did note that Chinese restrictions on chip exports could lower sales.