Are you wondering if the market can go significantly higher by year end? Maybe your question should take the U.S. market’s remarkable resilience into account.
Specifically, the S&P 500 has not closed in bear market territory. In fact, the large-cap barometer would have to close below 1096 to get there. Yet, with the exception of a few scary moments, the gauge has demonstrated its strong support at 1120. (It closed at 1195 on Tuesday, October 11).
Whether you put some cash to work today via dollar-cost averaging, or whether you are holding out for the mid-point (1170) of the 100-point trading range (1120-1220), you should have a “wish list” close at hand.
A ”wish list” is critical for several reasons. One, it gives you the wherewithal to act in the face of higher-than-normal volatility. Second, it empowers you to recognize that the S&P 500 is unlikely to close below 1096 in 2011. (Note: I minimize the downside risk of “being wrong” by setting stop-limit loss orders.)
So how do you develop your “ETF Wish List?” One method is to set parameters on a comprehensive screen. You might use the one at WSJ.com or ETFScreen.com. I prefer the latter. It gives me the freedom to screen by relative strength, volume, moving averages, price and trendline cross-overs.
Right now, for example, I am interested in ETFs that have demonstrated high “up” volume. In essence, with the markets rising dramatically in the last five days, I want an ETF that did so on better-than-average (three-month) volume.
A second criteria? I rarely consider investments that haven’t climbed above a 50-day moving average. Last, I want an ETF with a bit of Q4 momentum – one that can be found in the top 1/3 of the ETF universe on relative strength percentile rank.
On these three criteria, seven Stock ETFs with sufficient dollar-trading volume ($500,000+) passed the screen:
|For Your Consideration: 7 ETFs With Solid “Street Cred”|
|Pharmaceutical HOLDRs (NYSEARCA:PPH)||0.69%|
|WisdomTree Ex Financials (NYSEARCA:DTN)||-0.86%|
|PowerShares High Yield Equity (NYSEARCA:PEY)||-1.05%|
|SPDR S&P Dividend Aristocrats (NYSEARCA:SDY)||-3.82%|
|ALPS Alerian MLP (NYSEARCA:AMLP)||-3.92%|
|iShares Global Technology (NYSEARCA:IXN)||-4.16%|
|Vanguard Growth (NYSEARCA:VUG)||-5.63%|
|S&P 500 SPDR Trust (NYSEARCA:SPY)||-8.74%|
It should be noted that five of the ETFs that passed this test have yields that beat the 10-year treasury bond by 1.5%-4.5% annually. Clearly, dividend payouts are garnering a great deal of attention - from high-yield to healthcare to energy pipeline partnerships.
The other two - IXN and VUG - are probably capitalizing on tech’s traditional Q4 rally. Whether it actually happens or not remains to be seen.
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.