Leading and lagging sectors (discusses XLE, OIH, IYE, IYR)

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Includes: IYE, IYR, OIH, XLE
by: Nick Perry

In the chart below you can see the top and bottom performing groups from last Friday's close through this afternoon (approximately 12:00 PM), writes Nick Perry, who covers ETFs for Schaeffer's Investment Research.

Etf061005etfw

For the week, it looks like oil, energy, and real estate were the top performers with oil services taking the lead. Meanwhile, transports and technology related groups lagged the action. Last week I showed the chart of the Energy Sector SPDR  (ticker: XLE)  and a check of Oil Service HOLDRS  (ticker: OIH)  charts also shows an interesting picture.

Etf061005oih

Here we see a strong uptrend that recently pulled back to test the prior peak from last year. Now the group is poised to challenge its March highs. In order to get a better feel for the OIH, I pulled the component members and ranked them below based on their weighting in the OIH.

    •      Baker Hughes Incorporated  (ticker: BHI)  = 10.3%
    •      Halliburton Company  (ticker: HAL)  = 10.0%
    •      Transocean Inc  (ticker: RIG)  = 9.7%
    •      Schlumberger Limited  (ticker: SLB)  = 8.1%
    •      Globalsantafe Corp  (ticker: GSF)  = 8.1%
    •      BJ Services Company  (ticker: BJS)  = 7.4%
    •      Nabors Industries Ltd  (ticker: NBR)  = 7.2%
    •      Noble Corporation  (ticker: NE)  = 6.8%
    •      Diamond Offshore Drilling, Inc.  (ticker: DO)  = 5.7%
    •      Weatherford International Ltd  (ticker: WFT)  = 5.2%
    •      Smith International, Inc.  (ticker: SII)  = 4.8%
    •      ENSCO International Incorporated  (ticker: ESV)  = 3.9%
    •      National Oilwell Varco Inc  (ticker: NOV)  = 3.3%
    •      Cooper Cameron Corporation  (ticker: CAM)  = 2.5%
    •      Rowan Companies, Inc.  (ticker: RDC)  = 2.3%
    •      Grant Prideco Inc  (ticker: GRP)  = 2.3%
    •      Tidewater Inc.  (ticker: TDW)  = 1.9%
    •      Hanover Compressor Co  (ticker: HC)  = 0.6%

While I find it valuable to look at the group's overall chart, many times I find it helpful to look at how the top weighted members are behaving. Below are the four top names in the OIH.

Etf061005bhi

Etf061005hal

Etf061005rig

Each of these charts shows an uptrend but each is at a slightly different place in that trend. BHI has made a new high relative to earlier this year but is now nearing resistance from its high in late-1997 near 50. HAL meanwhile has been consolidating sideways while holding support near 40 and failing near 46. RIG recently bounced from a pullback and is now facing a critical test as it nears its recent peak near 55. Finally we have SLB which has shown a gentler ascent and recently bounced off the lower rail of its uptrending channel.

How these stocks react at these resistance zones will likely dictate how the OIH behaves as it approaches its own resistance 100.

Looking to my graph of the major indices shows us how some of the key barometers are moving relative to each other.

Etf061005indexw

Overall we see another flat week for the broad market indices such as the Dow Jones Industrials and S&P 500. The COMP fared a little worse and the NDX was the second worse performing index which fits with what we saw on what ETFs lagged this week.

Nick Perry (regressionchannels@sir-inc.com)