8 Sector ETFs in a Surprising Uptrend

If there's ever been an entire year where 100-point-plus moves on the Dow became commonplace, I don't remember it. Even during Nasdaq euphoria (1999) and dot-com heartbreak (2000), the daily volatility was not as jaw-dropping as 2008.

Through it all, the credit crunch, commodity boom-bust-boom, bankruptcies, global economic confusion -  the current U.S. bear market is NOT abnormal. The average top-to-bottom decline for a bear is roughly 30%; we've seen 26% declines. The average bear erases 1/2 of the prior bull market; the lows of S&P 1163 is only a percentage point greater than the average retracement circa S&P 1175.

Most money managers believe there's a great deal of opportunity in the current carnage. What's more, solid corporations with low/no debt have been buying back their shares.

Nevertheless, I admit shock and awe at some of the sectors that recently claimed "uptrend" status; that is, when an ETF or stock or fund climbs above its 200-day moving average, it is often described as having entered a long-term uptrend.

So are you ready for this list? After Friday's 9/19 end-of-trading bell, the following sector ETFs finished the week above their long-term trendlines:

1. The iShares Dow Jones Regional Banks (IAT). What's more, it actually posted gains on the year.
2. The streetTracks KBW Bank Fund (KBE). It gave back 8% in a single Monday session, but... are you kidding me?
3. The iShares Nasdaq Biotechnology Fund (IBB). It has carried most of health care to the top of the 2008 leader board. You can add Medical Devices (IHI) and SPDR Pharmaceuticals (XPH) to the list as well. (Read more about Medical Devices here.)
4. The Powershares Water Resources Fund (PHO). These are water companies, and not a pure play on the commodity. It genuinely captures sanitation and potable water infrastructure.
5. The iShares Dow Jones Transportation Fund (IYT). Oil holds the key for many of the shippers and truckers. But even with the oil volatility, IYT has been up for most of the year. (Read more on IYT here.)
6. The iShares Home Construction Index Fund (ITB). Homebuilders are way up... even in the worst housing recession since... yeah, yeah, yeah, we know.
7. Vanguard REIT ETF (VNQ). Ditto for the real estate investment trust space.
8. SPDR Retail (XRT). The U.S. consumer is dead? Someone is looking for a rebound in spending.

Granted, the activity for Monday, 9/22/08, pulled some of these vehicles back below the heralded 200-day moving average. Still, it is intriguing to think about what's been going on.

To sum up, investments that showed an uptrend as of 9/19/08 include the oil-slammed transports, the can't-make-a-buck retailers, the built-too-many-homes homebuilders, the speculative drug makers and the near-collapse/over-leveraged banks? Clearly, some investors seem to like the idea of a turnaround in the beaten-downs.

I am by no means suggesting that it's time to climb aboard; the Monday 9/22/08 selling activity shows that it's still rather dicey. Yet if you've got the stomach for the riskiest areas, they are outperforming tech, materials, energy and utilities.

I've known many analysts... and quite a few use the 200-day exclusively. And they will tell you, "It's difficult to argue with the trendlines."

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

Comments

[vince v:]

Gary, are you recommending any of these to your clients?

2008 Sep 23 01:36 PM

[Tom B:]

I am long in VNQ; real estate may be "toxic" in general, but I took a chance on it because its mostly commercial/rental real estate, and it pays a nice dividend.

2008 Sep 23 03:20 PM