Sector Momentum in Energy and Homebuilders

Includes: HHH, IGN, IYE, OIH, XLE
by: Nick Perry

Nick Perry (Schaeffer's Investment Research) submits: Last week we saw a skew to the upside with realty funds, taking the lead. This week we find that energy-related funds came out on top...

etf performance

At first glance I was tempted to say we had a fairly balanced view but that isn't really the case. Nearly three-quarters of my list showed a loss on the week as gains were mostly limited to energy, natural resources, housing, and utility funds.

The honor of the best performing ETF was shared in a three-way tie between the SPDR-Energy (NYSEARCA:XLE) , iShares DJ U.S. Energy (NYSEARCA:IYE) , and Oil Service HOLDRS (NYSEARCA:OIH) . In other words, oil-related stocks dominated the week. The XLE and IYE both hit new all-time highs while the OIH remains well below its mid-May peak. Silver has been strong since early-October and the SLV continues to add to those gains.

A look to the bottom of the list shows that technology-related ETFs were weakest. The Internet HOLDRS (NYSE:HHH) edged out networking, software and semiconductor funds to register as the largest decliner.

For a longer-term perspective, the bullets below show how the ETFs listed above have faired over the last six-months, prior to this week.

Prior Six-Month Returns for This Week's Top Performing Sector Exchange Traded Funds:

* SPDR-Energy (XLE) +6.1%
* iShares DJ U.S. Energy (IYE) +8.3%
* Oil Service HOLDRS (OIH) -4.8%
* iShares Silver Trust (NYSEARCA:SLV) +2.4%
* PS Energy Exploration & Production (NYSE:PXE) +10.3%
* PS Oil Services (NYSE:PXJ) -0.7%
* SPDR Homebuilders (NYSEARCA:XHB) -2.2%
* iShares GS Natural Resources (BATS:IGE) +3.7%
* Utilities HOLDRS (NYSEARCA:UTH) +13.6%
* Telecom HOLDRS (NYSEARCA:TTH) +18.2%
* SPDR-Utilities (NYSEARCA:XLU) +15.6%
* iShares DJ U.S. Utilities (NYSEARCA:IDU) +15.9%

Prior Six-Month Returns for This Week's Bottom Performing Sector Exchange Traded Funds:

* iShares GS Technology (NYSEARCA:IGM) +16.3%
* PS Leisure & Entertainment (NYSE:PEJ) +13.1%
* PS Hardware & Consumer Electronics (PHW) +14.7%
* iShares GS Semiconductor (IGW) +7.5%
* iShares GS Software (BATS:IGV) +23.0%
* iShares DJ Transportation Average (BATS:IYT) +5.4%
* Software HOLDRS (NYSE:SWH) +21.8%
* Semiconductor HOLDRS (NYSEARCA:SMH) +5.2%
* PS Software (NYSE:PSJ) +16.6%
* iShares GS Networking (NYSEARCA:IGN) +6.7%
* PS Networking (NYSE:PXQ) +14.8%
* Internet HOLDRS (HHH) +3.0%

Energy may have dominated this week, but it was the action in the SPDR Homebuilders Fund (XHB) that I wanted to single out:


As it stands now, the XHB is trading at its highest level since mid-June and nearing short-term overbought levels. However, that former congestion zone would now be expected to hold as support. It is also worth pointing out that the potential for upgrades is still around. According to Zacks, the component stocks of the XHB headed into today with just 38 percent of the total aggregate ratings as "buys."