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Yield Chasers Watch Out

|Includes: SPDR DJ Wilshire Global Real Estate ETF (RWO), SPG

The strength in the PowerShares QQQ Trust (QQQ) gave the bulls some hope as it was up 0.7% on the day. For the overall market, the close Tuesday, I think, will be more important. The market needs another strong close with positive market internals to support the view that last Thursday's low will hold.

The PowerShares QQQ Trust (QQQ) needs a strong close above $88.61 to improve its short-term outlook. The McClellan oscillator closed Monday at -8 but needs a close back above +50 to signal a further rally. On the downside, a close in the QQQ below $86.58 would be a short-term negative.

It is not a secret that investors have been chasing yields all year. At the start of May, one of the clear winners was the Select Sector SPDR Utility (XLU) as it was up 15.2% for the year. As I discussed in Is 2014's Hot Sector Ripe for Profit Taking?, at the time, there were technical signs that this sector was vulnerable to profit-taking.

The XLU dropped 1.54% in Monday's session and is now down 4.37% from the May 1st close. There is another high-yield sector that is now looking vulnerable and the risk is high for investors who buy these stocks now.

Click to Enlarge

Chart Analysis: The daily chart of the Select Sector SPDR Utility (XLU) shows that Monday's close was below the daily uptrend, line a, that goes back to the early 2014 lows.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.