Like most in the financial sector, real estate investment trusts (REITs) are enjoying a renaissance. Yet with a wave of commercial real estate foreclosures in the making, and the possibility that widespread unemployment will keep residential housing under wraps, investors wonder how long REITs can tow the ”economic recovery” line.

Indeed, it’s fairly well-established that a number of REITs have extraordinary debts coming due. Some have been paying dividends from stock instead of earned revenue or cash on hand, watering down the stake of current shareholders. And while some of the REIT index companies may have fairly stable assets in medical office buildings or health-related, long-term care facilities, many other office and industrial complexes are being crushed.

We look carefully at market sectors. Our analysis helps us in three ways.

1. In our "long only" accounts, we use the sector ratings to help in timing entries and exits.
2. In our short-term accounts, we trade the signal, finding new positions on a daily or weekly basis, depending on the established time frame.
3. In determining our overall market viewpoint, we consider various sector strength indicators to help in our assessment.

Briefly put, looking at market sectors is neither the forest nor the trees, but a useful perspective in between. We consider Trends, Cycles, and a bit of Anticipation. Since we apply the model to nearly 300 ETF's, we call it the TCA-ETF system. (For new readers, there is a more complete description of our methods at the end of the article.)

Indeed, when comparing Q2 of 2009 with the second quarter of 2008, one can easily see that we are still getting a significant 4.6% contraction.

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By Brandon Clay

Assuming for this discussion that the 200-day moving average of a security could be called its primary trend, let’s see how the prices of a round-the-world selection of 60 diverse fund types (and 6 transport indexes) stack up to their primary trend, and whether their primary trend is up or down.

The first observation is that nearly all are in a primary down trend, based on the 200-day (40-week or roughly 10 month) average. In this batch of fund categories, only aggregate US bonds, intermediate US Treasuries, the Dollar index and the Japanese Yen are in primary up trends, but the price of the Treasuries fund and the Dollar index fund have fallen below their primary trend line. That leaves only two where the primary trend is up and the price is above the primary trend line — US aggregate bonds and the Japanese Yen.

Let's take a look at some of this week's top- and bottom-performing ETFs and ETNs. Keep in mind that we cull the list to have a variety of sectors and we toss out Ultra, UltraShorts, 2X, 3X, & Inverse ETFs.

Some of these names are lightly traded and may be fairly illiquid. Make sure that you research the holdings and design of these ETFs before considering any trade.

Here is a list of the 10 equity ETFs with the smallest retracements (as of April 21, 2009) of their declines of the past year. Yesterday I posted the 10 equity ETFs with the largest bounce, which prompted inquires as to what the other end of that ranking looked like.

To make today’s list, I used the same filters:

The number of ETFs on Deathwatch continues to grow as we enter 2009. My current list contains 139 names: 97 ETFs and 42 ETNs. The list includes any ETF/ETN that is at least six months old and had an Average Daily Value Traded of less than $100,000 in December.

Exchange Trade Notes are suffering from concerns of default risk. The Lehman Brothers (LEHMQ.PK) bankruptcy, which resulted in the demise of three ETNs, is causing investors to hesitate before throwing money into these products. Unless ETN sponsors to take steps to calm investor fears, their representation on the list is likely to grow in the coming months.

These tables show the 1-week, 4-week, 13-week, 26-week and 52-week returns for a wide spectrum of asset types.

They, and other tables, are updated each Saturday morning on our site. These tables are for the week ended November 21, 2008.

By Eric Roseman

One of the biggest casualties of the global financial crisis is the big bust now underway in REITs, or real estate investment trusts. Until mid-2007, U.S. REITs dominated global investment performance in the post-2000 tech stock "bubble" era with eye-popping 25% annualized returns.

An article in this weekend's Wall Street Journal about ETFs with dwindling market caps caught our attention.  More and more ETFs seem to be trading hardly any volume these days, and many have already liquidated or announced plans to liquidate in the future.  As Wall Street usually does with everything, it seems to have gone overboard with ETFs, creating too many too fast.  Eventually only the biggest and strongest will survive.

We looked at more than 700 US ETFs and ETNs to see which ones are struggling the most with low market caps and volume.  The average market cap of all ETFs we looked at was about $816 million, but 131 (about 18%) have market caps lower than $10 million.  The market cap of the largest ETF, SPY, is also greater than the sum of the market caps of the smallest 596 (84%) ETFs.  Talk about income inequality!  The article notes that anything less than $50 million "probably loses money for the firm that sponsors it." 

When we discuss portfolios with our clients, we use the type of information provided in the tables below, and other information, as background to provide wide perspective on the current state of the markets.  You may find them useful in your own deliberations.

The first table is a list of representative funds for major categories:

Short selling has been a major topic on Wall Street lately, with the focus mainly on the short interest of individual stocks.  Below we highlight the US ETFs with the highest short interest as a percentage of shares outstanding as well as the ones with the highest short interest ratios. 

The most heavily shorted ETFs have short interest numbers that well exceed their shares outstanding.  The S&P Retail ETF (XRT) has a short interest figure that is more than 6 times its shares outstanding.  This seems a bit out of whack to us. 

By Jim Wiandt

Friday Barclays Global Investors' iShares family launched eight international exchange-traded funds on two different exchanges.

The launch can be divided into three buckets: international small cap, real estate, and emerging markets.

Broad International REIT Index ETFs
iShares S&P World Ex-US Property Index Fund (WPS)
SPDR DJ Wilshire International Real Estate ETF (RWX)
WisdomTree International Real Estate Fund (DRW)
iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund (IFGL)