Semis and Homebuilders Lead Broad Decline

The pullback that started last week continued this week, with 90% of the funds on my list showing a loss:

Semiconductors and housing were the weakest areas as the Semiconductor HOLDRS (SMH) and SPDR Homebuilders (XHB) lost around 10%. And like last week, the few advancing ETFs were focused on commodities. Gold stocks were particularly strong as the Gold Miners ETF (GDX) topped the list. Funds tied to silver, gold, oil, and bonds also gained ground.

A look to weekly chart of the Semiconductor HOLDRS (SMH) shows the group broke its recent lows:

Chart Courtesy of Thomson Financial

In late November, the SMH bounced near 31 but that low was firmly violated this week. That leaves the bottom from July 2006 as the next major area of support.

A look to the weekly chart of the SPDR Homebuilders (XHB) shows this week was also significant:

Chart Courtesy of Thomson Financial

The housing group trended lower throughout all of last year. In November, the XHB tried to put in a short-term bottom, but after only a small bounce, it once again finds itself facing its all-time lows.

Finally, for those interested in the broad market view, I created the chart below:

Chart Courtesy of Thomson Financial

This chart shows the relative performance of the iShares Russell 2000 Index (IWM), S&P Depositary Receipts (SPY) and Nasdaq-100 Trust (QQQQ) during the past 6 months. Small-caps have been hardest hit during this time with the IWM showing a loss of 14% while the QQQQ has the been leader by holding flat.