Broad Selloff Hits Utilities and Housing Hardest

Nick Perry (Schaeffer's Investment Research) submits: Last week, we saw a distinct upside bias as more than 90% of my list gained ground, led by realty funds. This week we find a severe reversal as nearly every fund on my list lost ground:

click to enlarge

A mind-boggling 99% of the ETFs I track showed a loss on the week, with the U.S. Oil Fund (USO) the lone gainer. Outside of the oil, a "strong" sector was one that lost less than 2%. At the bottom of the list, we find that utilities, housing, and reality ETFs were hardest hit.

In last week's column, I was continuing a discussion about the realty ETFs. Two weeks ago, we saw that funds like the iShares C&S Realty Majors (ICF) had broken below a consolidation pattern that had been in place since March 1. Last week, we saw a rally back to test the congestion zone as resistance. Given the ICF's placement on the graph above, you can infer that the ETF was rejected at that zone. However, the fund is still holding above the low from two weeks ago, a mildly positive sign.

Index performance this week:

Index performance year to date:

Charts: Google Finance

Comments

[Joseph Serrano:]

Seems to indicate the culprit is trending higher interest rates. Which by your data affected all equities but in particular realty and utilities worse. It appears to me that we have a creeping foundational change taking place where bond yields are becoming a competitive investment alternative to stocks, which should affect portfolio asset allocation. I have been moderately aggressive the last six months investing in equities and mutual funds, but encountering last weeks changes in interest rates i'm going to have a bias to being more conservative by increasing fixed holdings. I was 85/15, but adjusted to 70/30 last week and on a rally back may go to 60/40 because I think we are due for a serious correction going into September. "Pigs get slaughtered", No?

2007 Jun 10 10:04 AM

[Hankhawk:]

I keep reading worse reports of the housing market yet to come -- the subprime impact
is no way near the bottom. The Fed. will definitely not raise interest rates and risk
taking the blame for further housing problems and having some housing stocks go into
bankruptcy. Whatever investments you decide to make, know that interest rates will
not be raised for much of 2007 and into 2008 -- the housing market is in a critical decline.

2007 Jun 24 10:05 PM