DataTrader: Have the Industrials Become a Crowded Investment?

As the deepest anxieties about a double-dip recession have subsided temporarily, short term strength has returned to the industrial sector. Stocks like Joy Global Inc. (JOYG) and Parker Hannifin (PH) were higher by more than 7% and 6% on Monday alone.

Traders and investors alike have been able to take advantage of buying in stocks like these through exchange-traded funds (ETFs) like the Industrial Select Sector SPDRS ETF (XLI). But the recent gains in funds like XLI, gains that have taken the fund into overbought territory, mean that traders and investors should be wary about piling into funds like the XLI in the near term.

XLI has closed higher for four out of the past five trading days, the most recent finish in technically overbought territory below the 200-day moving average. Additionally, the exchange-traded fund, which also includes stocks like General Electric (GE) and Caterpillar (CAT) among its holdings, earned a two-point downgrade to a “consider avoiding” 2 out of 10 in our stock ratings. The last time shares of XLI were downgraded to a 2 out of 10, back in mid-September, the ETF closed lower for the following four consecutive trading days.

Quantified data and research on exchange-traded funds like XLI is available each evening after the market closes. To learn more, click here.

David Penn is Editor in Chief of