Internet, Energy Sectors Send Indexes Yet Higher

Nick Perry (Schaeffer's Investment Research) submits: Last week, we saw a broad-based rally where the SPDR Homebuilders (XHB) led and the Internet HOLDRS (HHH) lagged. This week we remain in rally mode, but find the Internet-related fund reversing course:

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Roughly three-quarters of my list headed higher this week with some of last week's laggards leading the charge. A poor reaction to Yahoo's (YHOO) earnings report hurt the HHH last Wednesday, but the trust made up all of that drop, and then some, on the back of a surge in Amazon.com (AMZN). Energy-related ETFs were laggards last week but popped to the top of the list this week.

Of the funds not participating in rally this week, precious metals ETFs were the weakest. Both gold and silver were down as the streetTRACKS Gold (GLD) and iShares Silver Trust (SLV) dropped more than two percent and three percent, respectively.

In last week's commentary I noted that the Semiconductor HOLDRS (SMH) had pushed above resistance near 35. This area had capped the SMH for nearly eight months and I said I would be watching action this week to see if that SMH could hold above that former resistance. Given that the SMH placed among the best performing funds this week, it is safe to assume that breakout held.

The charts below highlight the recent price action for the top- and bottom-performing ETFs. The one that looks the most interesting to me is the Telecom HOLDRS (TTH). While the TTH was the third weakest ETF from my list this week, the chart still looks constructive. The Telecom HOLDRS has been trending steadily higher for almost a year with recent pullbacks contained at the 50-day moving average. (Note - details about the indicators used in these charts can be found at the bottom of this column.)

Each chart features the 50-day moving average and a 9-day relative strength index (RSI). I use the moving average (the green line) as a simple way to gauge trends and the RSI (red line below the price) suggests whether the ETF is overbought or oversold. (More information about using the RSI can be found here.)

Index performance this week

Index performance year-to-date

Charts: Google Finance