Bearish Implications for Bank, Insurance, Retail and Internet Networking ETFs

by: Gary Gordon

It often pays to gander at individual companies that are languishing on the list of new 52-week lows. In general, if you identify a number of brand name corporations that fit into a particular industry, there’s a high probability that a sub-sector ETF has been rattled as well.

For instance, Bank of America (NYSE:BAC) and Hudson City Bancorp (NASDAQ:HCBK) reached new depths on 6/8/11. Their direct and indirect influence on SPDR KBW Bank (NYSEARCA:KBE) is decidedly negative. Investors should note that KBE is down more than 15% from 2011 highs and it has entered a technical down-trend below a long-term, 200-day moving average.

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KBE 200

Insurers are also experiencing a high level of stress. Both American International Group (NYSE:AIG) and Genworth (NYSE:GNW) marked unceremonious new 52-week lows. Not surprisingly, they’ve inhibited demand for shares of SPDR KBW Insurance (NYSEARCA:KIE). Shares of KIE are down more than 12% from a 2011 top, and the current price is well below a 200-day trendline.

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KIE 200

Financial sub-segments are exuding a lack of confidence that is eerily reminiscent of 2007-2008. And, if memory serves, retailers were the next casualties of that war.

Here in 2011, Target (NYSE:TGT), Office Depot (NYSE:ODP), Talbots (NYSE:TLB), Radio Shack (NYSE:RSH) and Urban Outfitters (NASDAQ:URBN) are among the ”unfortunates” that have been taken out back to the woodshed. The damage to the Retail HOLDRS (NYSEARCA:RTH) may not seem dramatic with a -8% drawdown and a price still above a long-term moving average. That said, the consumer discretionary sub-sector doesn’t appear to be in the driver’s seat of a second half turnaround either.

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RTH 200

If you ask the average investor about where he/she might expect to see signs of success, that person might point to the Internet. He/she might even be savvy enough to use terminology like “the cloud” and ”multi-media.” And yet, some of the more prominent players in this arena like Cisco (NASDAQ:CSCO) and Akamai (NASDAQ:AKAM) are floundering at the bottom of the sea. It follows that the iSharesNorth American Technology-Multimedia Networking Fund (NYSEARCA:IGN) is more than 16% below its 2011 pinnacle and well beneath its 200-day trendline.

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ign 200

Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.