#$d

In the weekly bar chart of the Utility Sector Index (UTY) above, seasonal strength (lower pane, shaded in yellow) typically begins following an early or mid-March bottom and usually lasts through early October although the bulk of the move is typically done sometime in May or early June (blue arrow).

5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers

Dominion Resources, Ticker: $D

Dominion Resources, $D, is the first utility to make the Top 10 in a long time. Many have broken out, but this one is rising and at a critical point for a trade. It is filling the gap from November and breaking the 200 day SMA. The RSI is rising and in the bullish zone while the MACD is also rising. Look for a break above the gap level to participate.

Edwards Lifesciences, Ticker: $EW

Edwards Lifesciences, $EW, made a top in late November and has been pulling back since. Friday it accelerated lower and that move brought the RSI down into the bearish zone. The MACD continues to fall as well. With the 100 day SMA just below, look for a break below it to follow to the downside.

GNC, Ticker: $GNC

GNC, $GNC, made a top in August as it pushed out of consolidation, but then failed and trended lower. There was a strong selling spike down in October upon release of their earnings report and then again in November on news of a Federal Enforcement Action. But since then it has consolidated and is now slowly turning higher. Friday brought it to the November high with the Bollinger Bands® opening. The RSI is rising and on the edge of the bullish zone with the MACD also rising. Look for a push over the November high to participate to the upside.

PPG Industries, Ticker: $PPG

PPG Industries, $PPG, had a solid bounce off of the bottom made at the start of October. But that move sputtered as it pushed over 100 and it has now been falling against trend support. The RSI is falling and bearish and the MACD is falling too. Look for a push under support to accelerate the move lower.

UnitedHealth Group, Ticker: $UNH

UnitedHealth Group, $UNH, has built a yearlong consolidation over support after a strong move higher. Heading into the week it is testing that support again, with the RSI in the bearish zone and the MACD falling. Look for a break of support to enter on the short side. The consolidation has the look of a rounding top and that could mean there is major downside opportunity.

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which, the worst first week of the New Year ever. Now heading into January options expiration there really does not look to be any relief in sight for the equity markets.

Elsewhere look for Gold to continue the bounce higher in its downtrend while Crude Oil burns lower. The US Dollar Index looks to continue consolidation at its highs while US Treasuries are biased higher in consolidation. The Shanghai Composite and Emerging Markets are biased to the downside and looking really ugly.

Volatility looks to remain elevated keeping the bias lower for the equity index ETF's SPY, IWM and QQQ. Their charts also point lower with perhaps a pause or oversold bounce in the short run, but with their intermediate term charts moving decidedly more bearish. The one possible exception is the QQQ which remains somewhat above the August lows. Use this information as you prepare for the coming week and trad'em well.

For Part 3, see  S&P 500 Sector ETFs: A Look Under the Hood, Part 3

Materials Select Sector SPDR

Next on the list is the Materials Select Sector SPDR ETF (XLB). XLB’s performance over its life has been quite good, roughly doubling the return of the S&P 500 since inception in 1998. 

This sector ETF is not at all what it sounds like. When you hear “materials,” you expect a portfolio full of mining companies. But the materials sector ETF is more diverse than that. Chemical companies EI Du Pont De Nemours (DD) — which most know better as DuPont — and Dow Chemical (DOW) are the first and third largest holdings, at 11.5% and 8.9% of the portfolio, respectively. Agribusiness giant Monsanto (MON) fills in the gap at No. 2, with 9.5% of the portfolio. 

Paper products company International Paper (IP) and paint seller Sherwin-Williams (SHW) also make the top ten holdings. The largest mining company in the portfolio — Freeport-McMoRan (FCX) — makes up only 3% of the portfolio. 

In XLB, you get a solid portfolio of global industrial companies. You distinctly do not get a collection of volatile mines at risk of copper price swings.

Utilities Select Sector SPDR

And finally, we get to the Utilities Select Sector SPDR ETF (XLU). The utilities sector was one of the real standouts of the last year, up about 16%. And for calendar year 2014, the utilities sector was the strongest performer of all sectors, due in no small part to the massive decline in bond yields. 

As the most “bond-like” of all sectors, utilities tend to move with bond yields. This was a disaster in 2013, the year of the “taper tantrum.” And it’s shaping up to be a disaster this year, as the utilities sector is the only S&P 500 sector currently in the red year-to-date. XLU is down more than 6% since the start of the year. 

If you’re looking for a portfolio of boring, regulated basic utility companies like Duke Energy (DUK) or Dominion Resources (D), then XLU is the ETF for you. 

But if you’re specifically hunting for high yield, you might want to keep looking. After the run XLU had, its dividend yield has fallen all the way to just 3.3%.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.