Of the 1,306 ETFs in the Reuters database, there are 21 with very strong up trend chart patterns and good liquidity for execution.
However, on visual inspection, which can see far more detail than any computer screen you are likely to use, we found only 10 that avoid unappealing moves between the computer filter test criteria, and that generally beat the S&P 500.
The names are highly concentrated in defensive stocks with a particular emphasis on low volatility and above average yield.
Most of those 10 ETFs have higher P/E ratios and lower long-term forward earnings growth rate expectations than the S&P 500, suggesting the defensive and yield stocks may be getting a bit ahead of themselves.
Here are the ETFs:
| Instrument Name | Symbol |
| FIRST TR CONSUMR STAPLS ALPHADEX ETF | FXG |
| FIRST TRUST NASDAQ CLEAN EDGE ETF | GRID |
| GLOBAL X FTSE ASEAN 40 ETF | ASEA |
| GUGGENHEIM S&P 500 EQUAL WE CONS ETF | RHS |
| ISHARE DJ US CONSUMER GOODS INDX ETF | IYK |
| ISHARES HIGH DIVIDEND EQUITY ETF | HDV |
| ISHARES MSCI ALL CO WRLD MIN VOL ETF | ACWV |
| ISHARES MSCI EAFE MINIMUM VOLAT ETF | EFAV |
| ISHARES MSCI USA MINIMUM VOLATIL ETF | USMV |
| ISHARES S&P GBL CONSU STPLS SCTR ETF | KXI |
| POWERSHARES DYN FOOD&BEVERAGE ETF | PBJ |
| POWERSHARES HIGH YIELD DIVIDEND ETF | PEY |
| POWERSHARES S&P 500 LOW VOLAT ETF | SPLV |
| POWERSHARES S&P INTERNATIONAL DE ETF | IDLV |
| PWSHS FTSE RAFI ASIA PCFC EX JPN ETF | PAF |
| SCHWAB US DIVIDEND EQUITY ETF | SCHD |
| SPDR FUND CONSUMER STAPLES ETF | XLP |
| SPDR S&P INTL CONSMR STAPLES SEC ETF | IPS |
| VANGUARD CONSUMER STAPLES ETF | VDC |
| VANGUARD HIGH DIVIDEND YIELD ETF | VYM |
| WISDOMTREE EQUITY INCOME ETF | DHS |
Here are the filter criteria:
- Price > 21-day average
- 21-day average > 63-day average
- 63-day average > 126-day average
- 126-day average > 252-day average
- 200-day average > its value 10 days ago
- 252-day linear regression slope is positive
- 126-day linear regression slope is positive
- 63-day linear regression slope is positive
- 21-day linear regression slope is positive
- Price above 252-day linear regression trend line
- Price above 126-day linear regression trend line
- Price above 63-day linear regression trend line
- Price above 21-day linear regression trend line
- Price within 5% of its 252-day high
- per minute dollar trading volume at least $25,000.
The 10 ETFs that looked OK when reviewed by eye:
Trailing yield and P/E and 5-year growth estimates are listed after each symbol.
- RHS (2.25%, 16, 9.37%)
- USMV (1.97%, 15, 8.79%)
- KXI (2.60%, 16, 9.21%)
- SPLV (2.89%, 16, 7.21%)
- XLP (2.89%, 16, 9.10%)
- IPS (2.30%, 16, 9.38%)
- VDC (2.79%, 15, 9.69%)
- VYM (3.05%, 13, 7.72%)
- DHS (4.13%, 13, 7.61%)
For comparison, SPY has a trailing yield, P/E and earnings estimate of 2.07%, 14 and 10.65%.
Charts for select 10 ETF versus S&P 500 ETF (SPY):
(click to enlarge)
(click to enlarge)
Sector Comparisons:
In view of the possibility that stocks are a bit extended, and generally wanting lower risk opportunities, we would tend to favor VYM and/or DHS which have higher yields and lower P/E ratios than SPY.
Here are the sector weights for those three ETFs:
| VYM | DHS | SPY | |
| Consumer Discretionary | 6.10 | 4.03 | 11.48 |
| Consumer Stapes | 19.30 | 15.66 | 10.93 |
| Energy | 13.10 | 8.85 | 11.12 |
| Basic Materials | 4.20 | 3.63 | 3.43 |
| Industrials | 12.60 | 4.13 | 10.24 |
| Info Tech | 7.90 | 10.95 | 18.28 |
| Telecomm | 5.30 | 11.98 | 2.98 |
| Healthcare | 12.90 | 15.16 | 12.25 |
| Utilities | 8.00 | 13.24 | 3.41 |
| Financials | 10.60 | 12.18 | 15.86 |
Disclosure: QVM has positions in VYM as of the creation date of this article (February 25, 2013). We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article, but are compensated retroactively by Seeking Alpha based on readership of this specific article.
General Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.
