May 2010 ETFs: A Woeful Tale of Relative Regression

by: Gary Gordon

At the beginning of the month, the prices on the vast majority of sector ETFs rested comfortably above short-term and long-term trendlines. By the end of May 2010, the worst May since May 1962, only the prices on a handful of economic segment ETFs managed to hold above respective 200-day moving averages.

Here is the woeful tale of relative regression over 1 month:

10 Of The Less Ugly May Performers
Approx %
Market Vectors Gold Miners (NYSEARCA:GDX) -0.97%
SPDR Pharmaceuticals (NYSEARCA:XPH) -3.72%
Claymore Airline (NYSEARCA:FAA) -4.02%
iShares Telecom (BATS:IYZ) -4.12%
SPDR Select Utilities (NYSEARCA:XLU) -4.32%
SPDR Select Staples (NYSEARCA:XLP) -4.50%
iShares NAREIT Residential (NYSEARCA:REZ) -4.81%
JP Morgan Alerian MLP (NYSEARCA:AMJ) -5.21%
iShares DJ Health Providers (NYSEARCA:IHF) -5.25%
iShares Total Commodity (NYSEARCA:DJP-OLD) -6.50%
10 Of The Most Egregious Performers
Market Vectors Agribusiness (NYSEARCA:MOO) -12.46%
Vanguard Energy (NYSEARCA:VDE) -12.55%
iShares Global Financials (NYSEARCA:IXG) -12.57%
Market Vectors Steel (NYSEARCA:SLX) -12.68%
PowerShares Private Equity (NYSEARCA:PSP) -13.52%
First Trust AMEX Biotech (NYSEARCA:FBT) -13.62%
PowerShares Clean Tech (NYSEARCA:PZD) -13.75%
First Trust NASDAQ Clean Edge (NASDAQ:QCLN) -15.78%
iShares DJ Oil Equipment (NYSEARCA:IEZ) -19.35%
Oil Service HOLDRs (NYSEARCA:OIH) -22.20%

Oil services and oil equipment stocks were ruthlessly battered by the BP spill. A moratorium on off-shore drilling isn’t going to help.

Yet even without the oil spill, energy and materials stocks tied to a wide variety of commodities (e.g., oil, gas, agricultural products, base metals, etc.) experienced a bloody downturn. This had less to do with the BP oil spill and more to do with threats to the global growth story. Those threats include China lessening its demand/reining in its growth as well as deflationary pressures in “re-recession-prone” Europe.

For the most part, there isn’t a sense that anything performed well. The fact that Staples (XLP), Utilities (XLU), Pharma (XPH) and Health Providers (IHF) fell much less than the S&P 500’s -8.25% is a function of lower-risk equities in general. And the Gold Miners (GDX) one-month victory is directly attributable to gold breaking through $1200 per ounce.

That said, one would be hard-pressed not to be reasonably impressed by JP Morgan Alerian MLP (AMJ). The energy MLP exchange-traded aggregator didn’t suffer as badly as one might have expected in the “dump-oil-free-for-all.” (Review Energy MLPs here.)

Disclosure Statement: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above.The company receives advertising compensation at the ETF Expert web site from Invesco PowerShares Capital Management, LLC and Geary Advisors, LLC. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.