A comment from Kenneth regarding a pullback in the biotech sector:

Hi VFC,

I noticed that the biotech sector seems to be retracing downwards after its recent run. Recent press releases from several biotech companies have not garnered much response in terms of upward price movement (for eg. AGEN's glioma trial results and Peregrine's breast cancer trial results to name a few). I have not been investing in biotech stocks long enough to know if this is just an expected retracement and that the biotech sector will recover soon or that the bubble for small biotech companies has burst and won't recover for some time. Would appreciate your input.

Quick! Would you be able to name the best performing, unleveraged, sector ETF for September?

The First Trust ISE Revere Natural Gas Fund (FCG) produced a slick 15.4%. In spite of the collapse of natural gas prices in 2009, companies engaged in exploration, storage and transportation of the commodity have nearly doubled (99% gain) off of the March lows.

Below is a list of ETFs hitting (but not necessarily closing at) 52 week highs as of the close on Friday, September 18th. Please note I filtered the screen by requiring the ETFs to have an average volume of at least 50k in order to filter some low volume issues and required they be trading for at least 1 year. There are several ways momentum investors can play a 52 week high, as I've detailed previously on Scott's Investments. In addition, many of the ETFs listed below are foreign ETFs. If the dollar weakness continues, as INO predicts, it will be bullish for many foreign companies and ETFs.

No Disclosures
Data Source: FINVIZ

All of this talk about health care reform… and yet, very little talk about health care as a profitable sector for investors. I have discussed the extremely impressive run for biotechnology throughout the bear market, however. (See “Biotech ETFs Lift Portfolios Higher Than Broad-Based Health Care ETFs and/or “Pharma ETFs, Biotech ETFs Are Benefiting From Swine and Politics.”)

The biotech bonanza aside, the dramatic collapse of Lehman (LEHMQ.PK) did not spell doom for Healthcare ETF enthusiasts. In fact, many Healthcare ETFs are better off today than they were 1 year ago.

Amgen’s (AMGN) got a “Phase 3″ drug in its pipeline called, “Denosumab.” It has possibilities for a range of conditions from osteoporosis to treatment-induced bone loss to rheumatoid arthritis.

Genentech (DNA) has a “Phase 3″ hopeful with “Bevacizumab” (Avastin). This one’s designed to interfere with the blood supply to cancerous tumors. It is believed that if you cut off a tumor’s blood supply, you can cut off its ability to grow or spread.

Stock markets, in general, again logged gains last week as pundits perceived economic data to be better than expected. But the recovery path is not home and dry yet, as shown by declines in crude oil, a number of emerging stock market indices, small cap indices and high-yield corporate bonds. All said, risky assets displayed some fatigue despite positive economic reports.

Caution remained over the robustness of any economic upswing, as reflected by the solid performance of government bonds, with safe-haven currencies such as the U.S. greenback and the Japanese yen also edging up.

Drug distributors (pharmaceuticals) weathered the heart of the bear better than most areas. That’s not unusual for a defensive sub-segment of health care.

Drug developers (biotech) have a history of volatility due to the hit-or-miss nature of creating the next big “thing’ or developing a ”flop.” Still, biotech has risk reduction qualities as a diversifier in one’s portfolio, as biotech ETFs had the lowest correlation with the S&P 500 in the 2007-2009 bear.

When I attempt to play golf, I work hard to keep the ball in the fairway. I don't try to kill it. I rarely attempt to hit a "cutesy," clever shot. And I'm not interested in winning any bets.

Nevertheless, there are plenty of times when I still manage to hit the white dot of a ball out-of-bounds or, "OB." In fact, it's easily the most discouraging part of a day on the links.

Most investments have found their way back to where they were in November of 2008, just as global credit was finally beginning to ease. In fact, the current bear rally/cyclical bull has recovered all that was lost to unemployment despair, recession/depression gloom and transition uncertainty.

Yet few stock ETFs can claim that their current prices are actually higher than they were 1 full year ago... BEFORE the global credit crisis meltdown hit circa September 2008. As implausible as it may seem, however, there are 3 sector ETFs that can make just such a claim.

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there and give investors some new ideas. For this week, Tech finally took a break (if you can call a 10% gain on TYH a "break") in comparison to some of the other leveraged ETFs. In order to share some other niche ETFs, I wanted to avoid leveraged ETFs this week, especially since they generally don't make for suitable "investments" but are rather a trading/hedging tool as outlined here in this leveraged ETF risk article.

Here are 3 top performing ETFs from last week that do not employ leverage:

Was it relief that most companies have been beating easy-to-top estimates? Everyone knows that earnings estimates had been lowered to the point of "extremely-hard-to-miss."

Or perhaps it is euphoria over uber-doomers turning less gloomy. While crystal ball owner, Nouriel Roubini, didn't say that we're on a path to venerable expansion, he did confirm that the current recession should end in Q4 2009. (With a stock market that anticipates 6 months out, perhaps we are the beneficiary of softer bear commentary from the likes of Meredith Whitney and Nouriel Roubini.)

Biotechnology ETFs enjoyed bug jumps at the beginning of this week, thanks primarily to a huge increase in the stock price of a key component of several funds. Human Genome Sciences Inc. (HGSI) has jumped more than 450% over the last week on news that its lupus drug Benlysta showed late-stage success in a clinical trial. The potential breakthrough development – a new lupus treatment hasn’t been approved by the FDA in more than 50 years – spurred hope that the drug could breeze through its second Phase III trials in November and hit the market as soon as late 2010.

According to results released by HGSI, 51.7% of patients taking 1 mg of Benlysta experienced improvement, compared to 57.6% of those taking 10 mg and 43.6% taking a placebo. The market seems to believe that, despite a relatively small sample size of 865 patients, the trials indicate the drug will hit the market as planned. However, lupus patients often relapse after showing signs of significant improvement, a major hurdle remaining on the path to full-blown approval. While the drug could potentially bring in billions of dollars from prescriptions, the market is likely pricing in the level at which GlaxoSmithKline (GSK), which has a 50% stake in the drug, will pay to make it wholly-owned. It is widely believed that Glaxo will gladly pay a huge premium to acquire the remaining 50%. While HGSI shareholders are the obvious beneficiaries of this speculation, a number of health and biotech ETFs that hold the stock saw big gains as well:

Biotechnology stocks present opportunities, but given the unique challenges of the sector, exchange traded funds (ETFs) may be the better route to go if you’re considering making an investment.

Owning individual biotechnology companies can be a challenging way to invest in the sector, as many of the current companies do not have enough money to stay in business past 2010. Also, any bad news regarding a company’s clinical trials can quickly put shareholders in the red, says Ron Rowland for Invest With An Edge.

Biotechnology is one of those sectors fraught with potential and peril at the same time. Pick the right company developing the right drug at the right time and the stock will reward shareholders. Conversely, any bad news regarding a company’s clinical trials can quickly put shareholders in the red.

Given the inherent risk involved in owning individual biotech names and the fact that many biotech companies currently lack sufficient cash to stay in business beyond 2010, biotech ETFs may be a better way to play this sector.

Value-oriented managers spend a lot of time trying to discern the true “dogs” – those stocks that may not benefit from the next cycle – from names that are simply out of favor but will rebound. What they are foremost trying to avoid is value traps – stocks that have experienced a large price declines and are mistaken to be value names.

In contrast with 2008, where quantitative strategists at Bank of America Merrill Lynch (BAC) saw value trap candidates triple as the market itself looked like a giant value trap, they see far more attractive value opportunities today.

One area you can see I've been transitioning into is healthcare. I still don't buy the "technology is a safe haven" thesis, but I have to respect that's where money flow is going. Healthcare I can feel a bit more comfortable with because it's a traditional safe haven in times of recession. Not that we are in one, or ever will be in - as the U.S. is the only country on the planet that will avoid recession even though all the problems being caused in the world are due to our excess. We are just that good. ;)

One subsector of healthcare that I always say I fear buying individual stocks is biotechnology - aside from Gilead Sciences (GLD) I can't recall ever owning an individual name in my life due to fear of FDA approval/denial ripping 40% of your capital in milliseconds. With that said, there are a few individual names I have been considering the past month only to watch them to levitate without me. So one approach is ETFs - 3 of which I am looking at and will review in this post - all of which hold the larger type of names I prefer  (if you think big cap biotech is risky, just imagine small cap biotech).

By Murray Coleman

As the old investing adage goes, the enemy of short-term stock trading is a sideways-moving market.

Below we highlight the 25 most overbought and oversold US ETFs based on their 50-day moving averages from our list of nearly 800 names.  Currently, the biotech ETF (BBH) is the furthest above its 50-day at nearly 18%, followed by Turkey (TUR), the Ultrashort Oil&Gas ETF (DUG) and XBI. 

On the oversold side, natural gas (UNG) is trading the furthest below its 50-day at -24%, followed by more energy related ETFs.