Sector ETFs Nearing Support - iShares Trust iShares U.S. Transportation ETF (BATS:IYT), SPDR Select Sector Fund - Financial (ARCA:XLF)

The current pullback from the early December high has the S&P 500 down five percent and below its 50-day moving average for the first time since October. While the close below the moving average for the second consecutive day on Tuesday, December 16 is a red flag, it is not the ultimate sell signal. The last few pullbacks in the index have breached the indicator for a few days before the buyers jumped into the market.

The 50-day moving average is an important technical tool because it is a line that can indicate the trend of the stock or index visually. It represents the average price of the stock over the last 50 days of trading.

There are a number of sector ETFs that are sitting on or near their 50-day moving averages. If they can hold near the indicator in the next few days, it could result in a high probability buying opportunity.

iShares Dow Jones Transportation Average

The

iShares Dow Jones Transport. Avg. (ETF)IYT

tracks 22 different

transportation stocks

across five sectors within the industry. IYT is one of the many sector ETFs that is currently sitting on its 50-day moving average.

The ETF has fallen 5 percent since the last week in November. The pullback has been accompanied by higher than average volume, which is not a positive technical sign. However, the transportation ETF managed to close just above the moving average on December 16, which is constructive. If the ETF can hold the $157 area in the coming days, it could be time to start to build a position.

Select Sector Financial SPDR

The

Select Sector Financial Slct Str SPDR FdXLF

tracks 87 publicly traded companies in the

financial sector

in which more than 36 percent are in bank stocks.

XLF experienced a very impressive 11 percent rally through the second half of October and November, however the ETF has fallen five percent since the first week in December. The ETF is currently sitting on its 50-day moving average, which is at $23.75. There is also past price support in the area, therefore a consolidation near the moving average for a couple days is a buy signal.

Select Sector Industrial SPDR

The

Sector Spdr Trust SbiXLI

is made up of 64 publicly traded companies across 12 sectors within the

industrial industry

A nearly six percent pullback in the price of the ETF from an all-time high has XLI just below the 50-day moving average and sitting on price support from earlier this year. Between $54 and $55 is important support for XLI that is must hold in the coming days.

Select Sector Consumer Staples

The

Consumer Staples Select Sect. SPDR (ETF)XLP

tracks 42 publicly traded

consumer staple companies

that are spread out among six sectors within the industry.

The ETF has held up well during the recent market sell-off and is only down 3.5 percent from the all-time high. The 50-day moving average is currently at $47.20 and with the ETF sitting just above the support line it is now a time to consider building a position.

Investors interested in taking advantage of the current pullback as a buying opportunity could use the 50-day moving average as one strategy for choosing ETFs or stocks. The above-mentioned sector ETFs are at levels where by the end of the week they will either be buying opportunities or they should be eliminated as potential candidates.

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