ETF Winners & Losers Heading Into the New Year

The market ended last week higher, but as it has the last two weeks it started off strong and ended weak. We were unable to take out key resistance points with the market fading as they were challenged. Does this put an end to the Santa Rally? There is still some glimmer of hope to hear the clatter of stocks moving higher into the New Year. Even if we manage to move higher, I would not be surprised for the Santa Rally to end in a New Years hangover. There is still a major downtrend in play and the current bounce has not proven to be any more than just that, a bounce.

Small Caps find some mojo for the week. They failed to break through resistance at 260 on the S&P SmallCap 600 Index, but they the index is in position to break higher short term. iShares S&P SmallCap 600 ETF (NYSE: IJR) is the ETF that corresponds to the index and worth keeping an your eye on to break through resistance at $43.60. This could clear the way for a move to the November high, $48.17.  

Healthcare was the clear leader last week gaining 3.8%. Consumer Discretionary was up 1.3% along with Industrials gaining 1.4%. Energy lost 4.7% followed by Basic Materials down 1.3% and Utilities down 1.1%. This was another consolidation week as we remain in an 11 week trading range.

The S&P 500 Index is a good chart to review to see clearly the current resistance in play for the broad market. The 918 mark along with the 50 day moving average have been the key resistance points over the last two weeks. Clearing these levels would open the way for a move to 1005 or the November high. Even with a break to the November high on the S&P 500 Index, we would remain in the current trading range, but that is still better than a 13% move from Friday's close. The table below shows the sector ETFs and their respective break points for a move higher. Put them on a watch list to track how they play out this week.  

The challenge from my perspective remains leadership. What is going to lead the market higher? The short term game plan is to track the leaders into the new year looking for a break through near term resistance. Infrastructure plays have perked up on the expected stimulus package Obama is proposing after he takes office in January. This is currently leading materials, engineering and commodities higher short term. The pullback last week in these sectors is worth watching for entry point's short term. Retail continues to defy the odds and is in a position to offer some leadership into the new year. Chip stocks are attempting a rally which is helping the technology sector. Despite downgrades and revisions the PHLX Semiconductor Sector Index continues to show hope, at least short term. The Dow Jones US Insurance Index made a nice move higher as well last week and is setting up to provide some needed leadership as well in the financials. All of this could amount to a Happy New Year, but these are short term moves. Remember the major trend remains bearish.

Have a Happy Holiday and remember those who can't be home for the holidays as they defend or freedom!

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