Sector Week-in-Review: Momentum in Transportation, Energy (ETFs: IYT, PXJ, OIH)

Nick Perry (Schaeffer's Investment Research) submits: In my last column we saw a balanced overall picture, as strength in financials and gold was offset by weakness in energy and natural resources. This week the view is firmly skewed to the upside:

Most groups gained ground this week, as losses were infrequent and mild. A new fund on my list, the US Oil Fund (USO), earned the official distinction as the weakest fund (as of 1:00 PM Friday). Internet stocks, software, and healthcare stocks also lagged the rest of the field. Leading the action was a mix including transports, oil services, and basic materials.

For a longer-term perspective, the bullets below show how the ETFs listed above have faired over the last six-months, prior to this week. In other words, it shows how they had been performing before this week's move.

Prior Six-Month Returns for This Week's Top Performing Sector Exchange Traded Funds:

* iShares DJ Transportation Average (IYT) +21.3%
* PS Oil Services (PXJ) +27.8%
* PS WilderHill Clean Energy (PBW) +44.5%
* Oil Service HOLDRS (OIH) +32.4%
* streetTRACKS Gold (GLD) +42.3%
* iShares DJ U.S. Basic Materials (IYM) +22.4%
* SPDR-Industrial (XLI) +16.5%
* Utilities HOLDRS (UTH) +1.8%
* SPDR-Materials (XLB) +21.2%
* iShares DJ U.S. Industrial (IYJ) +17.1%
* PS Semiconductors (PSI) +35.7%
* First Trust DJ Select MicroCap (FDM) +17.5%

Prior Six-Month Returns for This Week's Bottom Performing Sector Exchange Traded Funds:

* iShares Lehman 1-3 Year Bond (SHY) -0.3%
* iShares Lehman 20+ Year Bond (TLT) -5.7%
* iShares Lehman Aggregate Bond Fund (AGG) -1.3%
* iShares Lehman 7-10 Year Bond (IEF) -2.4%
* Telecom HOLDRS (TTH) +11.4%
* PS Biotechnology & Genome (PBE) +6.3%
* iShares DJ U.S. Healthcare (IYH) +2.6%
* Software HOLDRS (SWH) +1.4%
* SPDR-Health Care (XLV) +2.3%
* iShares GS Software (IGV) +1.5%
* Internet HOLDRS (HHH) -9.9%
* US Oil Fund (USO) n/a

Looking over the data above, there appears to have been a shift towards momentum this week as traders tended to bid up strong groups and ignore some of the laggards. As we have discussed recently, clean energy stocks and gold have been strong and continue to be in the spotlight. Depending on what funds you follow, semiconductor could also be considered a fairly strong group.

As you can see above, the PowerShares Semiconductor fund (PSI) headed into this week with a gain that was comparable to the GLD and PBW. Of course, the issue is that the PSI is also handily outperforming other semiconductor funds. The iShares GS Semiconductor fund (IGW) is up 20.9 percent during that time, while the Semiconductor HOLDRS (SMH) shows a gain of just 13.0 percent. The discrepancy, obviously, can be explained by the way each fund is set-up so it pays to understand how they are weighted. More on this topic can be found here.