New 52-Week Highs Can Tell You Where The ETF Strength Is

by: Gary Gordon

On the first day of December 2011, a number of brand name corporations hit new 52-week highs. Here are a few that caught my eye: McDonald's (NYSE:MCD), Phillip Morris (NYSE:PM), Diageo (NYSE:DEO), Kraft (KFT) and Treehouse Foods (NYSE:THS).

Keep in mind, most of the media attention centers on the discretionary spending of the consumer (e.g., “Black Friday” widescreens, ”Cyber Monday” acquisitions of the new Kindle, etc.). However, non-discretionary consumer stocks are also on fire.

Has the battered economy dampened our collective desire to smoke Marlboros? Or drink Jose Cuervo Tequila? It certainly wouldn’t appear so. Indeed, we’re quite willing to pour non-dairy creamer in our coffee cups, eat Egg-McMuffins for breakfast and savor Kraft Macaroni and Cheese for dinner.

The new 52-week high list trickles down to top performing ETFs as well. In fact, exchange-traded stock funds like SPDR Sector Select Consumer Staples (NYSEARCA:XLP) reside near the top of the year-over-year performance list.

12-Month Performance On Consumer Staples
Approx % Gain
First Trust Consumer Staples AlphaDex (NYSEARCA:FXG) 16.1%
Rydex Equal Weight Consumer Staples (NYSEARCA:RHS) 13.9%
SPDR Select Sector Consumer Staples (XLP) 13.8%
Vanguard Consumer Staples (NYSEARCA:VDC) 13.4%
iShares Global Consumer Staples (NYSEARCA:KXI) 10.3%
iShares DJ Consumer Goods (NYSEARCA:IYK) 9.0%
SPDR S&P 500 4.0%

Many may question if it is too late to get into more conservative non-cyclicals. The answer is ... “probably not.” Consider the 12-week changes in relative strength percentile rank of the 10 major economic sectors below:

Rank 9/7 Rank 12/1
Utilities Select Sector SPDR (NYSEARCA:XLU) 88.2 94.8
Consumer Staples Select SPDR (XLP) 85.7 92.9
Technology Select Sector SPDR (NYSEARCA:XLK) 62.0 86.6
Health Care Select Sector SPDR (NYSEARCA:XLV) 79.6 85.5
Consumer Discretion Select SPDR (NYSEARCA:XLY) 68.2 83.3
S&P 500 SPDR Trust (NYSEARCA:SPY) 56.3 73.5
Industrials Select Sector SPDR (NYSEARCA:XLI) 29.7 69.8
Energy Select Sector SPDR (NYSEARCA:XLE) 67.6 69.2
Materials Select Sector SPDR (NYSEARCA:XLB) 49.4 42.5
iShares Dow Jones Telecom (NYSEARCA:IYZ) 45.5 37.7
Financials Select Sector SPDR (NYSEARCA:XLF) 11.1 25.6

Modest improvement in the U.S. economy - stable jobless claims, GDP acceleration, strong corporate earnings, retail spending records, manufacturing expansion - have given a boost to some cyclical ETFs. Most notably, technology (XLK) and consumer discretionary (XLY) have moved into the upper echelon of relative performance; meanwhile, industrials (XLI) have put together a “whopper” of a percentage change in relative strength rank from 12 weeks ago.

Nevertheless, the three primary non-cyclical stock ETFs - healthcare (XLV), utilities (XLU), staples (XLP) - have all become even stronger in these past 12 weeks. This sugggests that non-cyclicals are performing as well as they ever have in terms of momentum. Equally compelling, they may be less affected by systemic shocks and uncertainties.

Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.

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