The end of the 2nd quarter of 2012 is about upon us - Friday will be the last trading day of June. In general, this hasn't been a good quarter to be a long-side buy-and-hold investor or trader. Let's break down the performance of some of the major market sectors over the year-to-date (YTD), for the 2nd quarter, and for the month of June -- and see what we can glean from the data.
We're using 9 of the large, well-known, broad-based ETFs to track the data in the charts below:
S&P 500 Index ETF (SPY)
Nasdaq 100 ETF (QQQ)
DJIA ETF (DIA)
Russell 2k ETF (IWM)
SPDR Gold (GLD)
PowerShares US Dollar (UUP)
iShares 20 Year Treasury Bond (TLT)
Crude Oil (USO)
iShares International Europe/Asia/FarEast (EFA)
Using this group encompasses the 4 major US based stock indices, the major commodities of Gold & Oil, the Dollar, Treasury Bonds, and large cap non-US International (with a Europe slant). There are many other specific sectors that we track and trade through ETFs, but this group will give us a quick snapshot of what trends are occurring (if any).
First let's take a look at the chart below, which is the 2012 YTD relative performance of these ETFs. The noteworthy thing here that jumps out is that most of the group is sitting in the -4% to 5% range for the year - and excluding International/Europe , many are in the +0.5% to 5% range. This shows a pretty high level of correlation in terms of net overall performance through the midway point of the year.
The two obvious outliers among this group for 2012 YTD are the PowerShares Nasdaq 100 & US Crude Oil ... QQQ (in purple) has been the outperformer among this group -- keep in mind, however, that Apple (AAPL) stock is a large component currently in the Qs, nearly 20% of the assets. So AAPL will have a large impact on how QQQ performs. (All charts from TradeStation)
Now let's look below at the same ETFs over the time frame of the 2nd quarter of 2012 (May through June).
Here is where you can pretty clearly see it's been a tough quarter for long-side stock holders in general. Treasury Bonds (TLT, in orange) and the Dollar (UUP, red) have been up nicely -- but here we see the bigger pack of these ETFs bunched together and correlated, this time in the -5% to -8% range. Note that Gold ETF did the same as the major stock indices.
TLT & UUP were the outperformers over this time frame, some of which is due to money going to 'safe havens' because of European debt and U.S. economy uncertainty. The underperformers were the International/Europe EAFE ETF and once again Crude Oil .
The differing performance of assets like the Dollar, Gold, and Crude Oil over the different time frames examined shows that, as we've previously discussed, there is NO permanent direct correlation between these assets. Although they certainly are inter-related and can be directly related at times, there is no permanent "in stone" historic link between the Dollar's performance and that of stocks/commodities, etc - despite what you may read/hear elsewhere.
Now let's zoom in further to look at these same ETFs over the month of June. You can see below that there's not a lot of variance in the monthly performance of these sectors -- virtually all of them are net oscillating around the -1.5% to 1.5% range for the month - close to break-even.
The exception (on all 3 charts) is Crude Oil , which is down over 8% for the month. We'll be looking further in depth at this Crude Oil tracking ETF in the future. But basically, since a big up move and swift huge correction that ended in late 2008, USO has been trading mostly in the 30 to 45 range from 2009 to 2012. Sitting now right around that 30 level, and with the relative underperformance throughout 2012, one may glean that USO could be a good bet to outperform these other assets in the 2nd half of 2012. But the trend is your friend and don't fight the chart - while the range is important and may provide support here, USO has been in steady strong downtrend in place since May 2012. We would need to see it turn around on the daily chart to justify a potential 2nd half outperformance by Oil.
Of course, there are hundreds (and thousands) more ETFs that cover a wide variety of sectors/commodities/currencies/countries which aren't as directly correlated at any given time.
Below are the results of a scan (data from FinViz) we ran for ETFs that are optionable with over 100k average daily volume. It is then sorted by the performance over this quarter -- and Ultra, Bear, Inverse, 3x, etc ETFs are removed to try to see the pure sector performance.
Remember that major market ETFs like SPY, DIA, QQQ, IWM, and GLD are all down -5% to -8% over this time frame. Meanwhile Treasury Bonds (as previously discussed), Natural Gas ETF (UNG), and SPDR Biotech (XBI) are up 8% or more over the same time frame - quite a divergence and potential gains for the option trader or investor who dynamically allocates assets. Japanese Yen ETF (FXY) and Mortgage ETF (REM) are also among the top outperformers.
Similarly there are underperformers that are 3x or more underperforming the broad market for Q2 2012: such as Global Uranium (URA), Market Vectors Coal (KOL), iShares Brazil (EWZ), and MarketVectors Junior Gold Miners (GDXJ), in addition to the Oil (OIL) already mentioned.
A lot of energy commodity ETFs have popped up on both the bullish & bearish list for this time period (Natural Gas, Uranium, Oil, Coal) - this is certainly something to keep an eye on for the 2nd half of 2012.
2012 ETF Q2 Leaders/Laggards