ETFs to Own and Avoid

by: Jeffrey Saut

Jeffrey SautFrom Raymond James strategist Jeffrey Saut's latest essay:

...Turning to the charts, last week the DJIA (10868.38) briefly recaptured its 200-day moving average [DMA] at 10943, but failed to hold above it. Meanwhile the S&P 500 [SPX/1240.29] could not better its respective 200-DMA [1264] and remains negatively configured as its 50-DMA [1260] crossed below its 200-DMA. And don’t look now, but the NASDAQ 100 {NDX/1451.88] made a new yearly reaction low. Yet by far the most disturbing weekly event was the D-J Transportation Average’s [DJTA/4456.29] 205-point Thursday tumble. This is significant because the Transports represent “things” being moved around the country. The inference is that the economy is cooling off and maybe, just maybe, the overspent/undersaved American consumer is finally running out of “gas.” This view is reinforced by chart breakdowns in the Retail Holders (NYSEARCA:RTH) ($89.13), the Housing Index [HGX/190.01], the Consumer Discretionary SPDR (NYSEARCA:XLY) ($31.34), as well as many of the marquee retail stocks.

Nevertheless, along the “there is always a bull market somewhere” line, we continue to think Japan is in a secular bull market, a view we have held since the spring of 2003. Given the Japanese iShare’s (NYSEARCA:EWJ) ($12.77) 20% decline from its May highs, as well as the Japan Small Cap Fund’s (NYSE:JOF) ($12.65) 33% decline, we think those investors not exposed to Japan can began a scale-buying approach using these investment vehicles. We also think aerospace, energy, and water are in bull markets and would use the same scale-buying strategy for the PowerShares Aerospace and Defense (NYSEARCA:PPA) ($15.99), the PowerShares Water (NYSEARCA:PHO) ($15.65), and 5.9%-yielding Blackrock Global Energy Fund (NYSE:BGR) ($25.26), which is selling at a 13% discount to its net asset value...