The Information Technology sector ranks second out of the ten sectors as detailed in my Sector Rankings for ETFs and Mutual Funds report. It gets my Neutral rating, which is based on aggregation of ratings of 27 ETFs and 155 mutual funds in the Information Technology sector as of April 16, 2013. Prior reports on the best & worst ETFs and mutual funds in every sector and style are here.

Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the sector.

Not all Information Technology sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 418), which creates drastically different investment implications and ratings. The best ETFs and mutual funds allocate more value to Attractive-or-better-rated stocks than the worst ETFs and mutual funds, which allocate too much value to Neutral-or-worse-rated stocks.

To identify the

While I do not build portfolios around sectors of the stock market, it is important to review sectors ETFs as it provides another view of market conditions. We examine the Bullish Percent Index information as shown in this article, to see where the market as been and is it over-bought or under-sold. When the BPI values are above the 70% line, as most are today, we argue the market is too high to be an aggressive buyer. When the BPI values are below the 30% line, it is time to back up the "securities truck" and load up the portfolio with equities. This does not happen too often, but it certainly was the case in late winter of 2009.

The "Delta Factor" information is quite different from Bullish Percent Index information in that it attempts to peer into the future. We are looking for the slight probability

After the market closes on Tuesday, April 23, the world will turn its attention to the previously untarnished Apple (APPL). Its epic downward spiral from $700 per share to a sub-$400 price is largely responsible for the relative underperformance of technology ETFs. Below, the Vanguard Information Technology (VGT)/S&P 500 price ratio demonstrates the trend.

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Over the last week, however, a different tech bellwether deserves the lion's share of the blame. IBM's (IBM) share price eroded 11% due in large part to a high-profile "miss" on revenue and earnings. Unfortunately for exchange-traded enthusiasts, the company has an oversized weighting in a number of technology ETFs as well as the Dow.

Whenever you talk about what sectors of the market are working, market cap is one aspect that is often overlooked. How often have you heard someone say that Technology is leading large caps but lagging in small caps? Not often. With this in mind, we wanted to highlight the relative strength of all 10 sectors within both large and small cap indices.

In the charts below, we highlight the relative strength of each sector to its corresponding index across all three market cap levels (S&P 500 large cap, S&P 400 mid cap and S&P 600 small cap). Rising lines indicate that the sector is outperforming its index while a falling line indicates that the sector is underperforming. As you will see in the charts, most of the time the sector's relative strength moves in the same direction across all three market cap levels, but there are times when they diverge,

More Top Ten ETFs

The technology sector is where the U.S. still leads the world in product innovation and distribution. Certainly the manufacturing of final products or hardware has moved overseas but world class product design and innovation continues to take place domestically.

During the first quarter of 2012 the technology sector was leading markets higher overall. This was especially so given Apple's (AAPL) rapid growth and overweighting in many tech indexes. …Apple's high weighting is a door that can swing both ways. When times are good for the company that enhances returns but should the stock price falter the opposite would hold true.

This was the comment I posted from last spring. ETFs with heavy weightings in Apple delivered outsized performance in the first quarter of 2012. However, as I mentioned earlier, the door can swing both ways, and this proved to be true in the fourth quarter of

Apple (AAPL) is a large enough allocation in the technology sector, and its near-term performance is sufficiently in question, that some scenario analysis could be helpful in setting a range of expectations for the S&P 500 and the technology sector for the next 12-months.

We did a bottom up projection of the price change for the S&P 500 (proxy: SPY), the S&P 500 Technology Sector (proxy: XLK) (which includes telecom), and the MSCI Information Technology 25/50 index (proxy: VGT).

Right now Apple is 3.86% of the SPY, 14.48% of XLK and 20.5% of VGT, according to the weights currently published on the websites for each ETF.

To do the scenario projections we calculated the percent difference between the Street consensus 12-month price target and the current market price for each constituent company, then multiplied those differences per company by the allocation weight of each company

By Robert Goldsborough

The share prices of some large-cap United States technology companies have been battered in recent months, amid a global macroeconomic malaise, uncertain prospects for some players, and very negative market sentiment toward certain corners of the tech space.

These declines represent a buying opportunity for investors, as the technology sector now has become undervalued in aggregate, according to Morningstar's equity analysts. Our analysts assert that recent sell-offs now mean that several tech titans, such as Intel (INTC), Microsoft (MSFT), and Apple (AAPL), are priced to reflect long-term secular declines in their business. And while the PC market, which Intel and Microsoft serve, may well be struggling and in decline, investors should note that Intel and Microsoft have exposure to many other growing areas of technology. More broadly, for a longer-term investor to be comfortable with currently sagging valuations in the tech space, that investor would need to

I have been warning about a major shift in Apple (NASDAQ:AAPL) for the past three quarters, and now what I warned about before is happening in front of our eyes. Apple is not the same company without Steve Jobs. The company became very greedy and did not treat its suppliers correctly, the competition caught up with it fast, and in many ways has surpassed the cutting edge that AAPL once was, and unless Apple can somehow regain that cutting edge status the fickle consumer will look elsewhere. Except for the die-hard Apple fans, some of whom will never consider a PC, consumers will not be destined for another iPhone, or iPad, or even an Apple TV, unless those products are simply better than the competition with a competitive price point. Apple cannot grow without the masses, and Die-Hard Apple followers cannot support the company on their own.

If this is

By The ETF Professor

On the heels of a pre-Christmas announcement that saw the firm lower fees on a variety of bond and broader market equity ETFs, Vanguard said today it will lower fees on its 10 sector ETFs. The news is significant because prior to today, State Street's (STT) State Street Global Advisors unit, the second-largest U.S. ETF sponsor, had the lowest fees on major U.S.-focused sector ETFs.

For example, funds such as the Consumer Staples Select Sector SPDR (XLP) and the Technology Select Sector SPDR (XLK) feature expense ratios of 0.18%, which had made the select sector SPDR's ETFs cheaper than their Vanguard equivalents.

Vanguard, the third-largest U.S. ETF issuer, can now wear the crown as the major issuer with lowest-cost sector funds.

The Vanguard Consumer Discretionary ETF (VCR), the Vanguard Energy ETF (VDE), the Vanguard Consumer Staples ETF (VDC), the Vanguard

A lot of comparisons have been made between the Technology sector post-Internet bubble and the Financial sector post-financial crisis. Below is a chart that highlights each sector's percentage change from its all-time high on the same time-scale (in days). The "crash" pattern for both sectors occurred over a similar time period, and they both experienced declines of roughly 85% from their highs.

The Technology sector is

Fidelity supplies ETF ratings from Ned Davis, S&P, Morningstar, Marco Polo and Sabrient Systems. In our view the Ned Davis ratings are of minimal value, because they provide too little differentiation between ETFs. S&P ratings provide more differentiation, but not much.

Morningstar, Marco Polo and Sabrient provide substantially more ratings differentiation, but their methods are proprietary and opaque.

In an article yesterday, we offered a simple, non-proprietary, and transparent rating method with highly granular differentiation and ranking of domestic equity ETFs.

Here is a table that shows the ratings on 21 key US domestic ETFs for each of the services supplied by Fidelity plus the one we published yesterday.

(click to enlarge)

You can see that Ned Davis provides a 4 of 5 rating on all 21 funds. While they may all be good choices relative to the universe Ned Davis rates, within the domestic universe as represented by

Dividend investors should expect middle of the road returns, and pure high quality and pure low volatility investors should expect to be near the bottom, compared to key US broad stock indexes and sector indexes in 2013.

VGT, XLK, XLE, IWM and XLB are projected to be the best total return ETFs among the 21 key S&P and dividend ETFs for 2013, based on Thomson/First Call average analyst target prices and trailing yields.

The technology sector outcome is highly leveraged to the returns of Apple (AAPL) due to its approximate 20% weight in the sector. If Apple does not perform as projected VGT and XLK could well fall back to the middle of the pack.

By: The ETF Professor

A fair number of ETFs tracking the technology sector are not starved for attention and a lot of that has to do with the large allocations to bellwether tech names such as Apple (AAPL) found within those funds.

However, a previously vilified tech ETF with scant Apple exposure has turned in an impressive 2012 performance. That fund is the First Trust ISE Cloud Computing Index Fund (SKYY). When SKYY debuted in July 2011, the ETF had its share of critics, some of which questioned the validity of such a narrowly focused ETF.

Out of the gate, SKYY proved those critics correct, tumbling from a debut price of $20 to $16. It appears SKYY is having the last laugh as the fund has jumped 16.5 percent year-to-date. As Street One Financial points out in a research note, SKYY is home to 42 stocks and

Like it or not, the so-called fiscal cliff and the European conundrum are two factors that are likely to make things difficult for the average investor. Apart from politics, we have central banks and large players such hedge funds working at cross purposes -- one is bent upon propping up the economy and the markets, and the other pulling stocks up and down for short-term gains.

The moot question is how does the average investor survive in a market that is not being driven by fundamentals, but by macro factors? The era of stock picking -- the buy and hope approach -- seems to have come to an end. The challenge is there, but I think there is also a way, a strategy that would give confidence and fairly good returns, even if it is for a part of your trading portfolio.

Technology sector ETFs offer a better opportunity for

With concerns over the fiscal cliff mounting, stocks traded lower for most of last week, posting modest gains on Friday and a stronger rally on Monday. Still, last week was the fourth in a row that stocks fell, marking the longest losing streak since the summer of 2011. It underscores my argument that until the fiscal cliff is resolved, markets will move based on news related to the cliff.

In light of the ongoing concerns about the cliff and recent market moves that have changed valuations, I favor two portfolio moves: reducing exposure to US industrials, while overweighting global technology.

First, some background. While there is definitively a path to compromise on the fiscal cliff, the problem in Washington continues to be that neither party is moving far from its initial position. The Republican leadership has given some ground by entertaining the notion of higher tax revenue without changing

Considering the lower economic growth rates in the U.S., stock exchange traded funds that hold companies with overseas exposure, such as the technology sector, will be in the best position to grow in the coming years, according to iShares analysts.

While the U.S. will eke out growth of about 2% over the next couple of years, the economy will still be susceptible to short-term risks, like the so-called fiscal cliff.

Moreover, the U.S. still has to tackle a stubbornly high underemployment rate, an aging workforce, an elevated and growing national debt, and lackluster productivity.

"Investors should build portfolios that are robust to a prolonged period of slow growth," Russ Koesterich, Managing Director, iShares Chief Investment Strategist, said in a research note. "Technology is another potential long term play as it has the highest percentage of international sales of any sector, and is therefore the least exposed to a regime

While both Mitt Romney and President Barack Obama claim the other will drag the U.S. economy down, stocks and exchange traded funds will likely continue to expand as the markets gain momentum.

Consumer spending is rising, employment numbers are improving, home prices are recovering, and banks are dishing out loans again, report Rich Miller and Steve Matthews for Bloomberg.

Peter Hooper, chief economist at Deutsche Bank Securities, cites pent-up demand as the main driver for economic expansion ahead. Since households have tightened their belts during the recession and its aftermath, consumers are now beginning to feel more optimistic

"Housing typically adds 1 to 2 percentage points" over a recovery, Dean Maki, chief U.S. economist at Barclays Plc, said in the Bloomberg article. With less distressed properties on the market, "you may get a bigger kick from housing" in 2015 and 2016.

"The die is cast for a much stronger

It may not take much to send the markets down these days. A profit miss by Google. A weak revenue showing by McDonalds. Or perhaps the most detrimental data point of the week: Existing home sales fell 1.7% on a year-over-year basis.

With interest rates this low, properties have become increasingly affordable. Yet existing homeowners who are marginally underwater may actually become more entrenched. That is, they are less likely to put their homes up for sale when they anticipate additional price gains that could soon make a home-seller’s decision profitable.

In essence, existing owners will wait until they can exit the “distressed” seller category and enter the normal home-seller segment. Unfortunately, the housing sector cannot fully recover unless the sellers become as active as the buyers. In other words, the latter may be excited by rock-bottom rates, but the former are hoping for additional price appreciation that may or

Instead of focusing on Apple, I am going to turn my attention to several technology ETFs that have exposure to the maker of the new iPhone. The ETFs will offer diversification for investors that do not want to put all their eggs into one basket and at the same time offer exposure to AAPL.

The ETFs

The SPDRs Technology Select Sector ETF (XLK) is composed of 81 technology-related stocks, however the number one holding makes up 20% of the entire allocation. That stock just happens to be AAPL and is a major reason

So who cares?

OK, so these leveraged ETFs achieve their trading objectives on a daily basis only, and that makes them unsuitable for market participants who invest long-term instead of along short-term and intermediate trends. Check this bull trend 3x leveraged SPXL chart and note how money could have been made with a leveraged bull on the way up, only to be followed with a leveraged bear on the way down. Also note how history is repeating itself when during this latest June to August rally, extremely low trading volume suggests that most retail investors are still