Leading and lagging sector ETFs for this year (XLE, IYE, BBH, HHH, IBB, SWH, XLB, IWM)

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Includes: BBH, HHH, IBB, IWM, IYE, SWH, XLB, XLE
by: Nick Perry

Today I want to deviate from my normal format and focus on the intermediate-term picture, says Nick Perry, who writes about ETFs for Schaeffer's Investment Research.

The graphs below are based on a select list of ETFs and indices that I follow in the blog and show the top- and bottom-performing groups from December 31, 2004 through 5/31 at approximately 11:00 AM.

Etf053105etfytd_1

Etf053105indexytd

Starting with the top- and bottom-performing ETFs, we see that this year's top performers are mostly from the energy, utilities, and natural resource areas. It is also worth noting that bonds, which Wall Street has widely expected to slump for some time, have held up this year. (For more information on bonds, subscribers to Schaeffer's Gold should read Bernie's commentary - "Why I Remain Bullish On Bonds".)

On the lagging side we see a number of technology subgroups such as internet, software, networking and telecom. You may also have noticed that biotech proxies show up on both sides of the leading/lagging picture. While this might seem contradictory, it is a function of the way these are weighted. The IBB is spread out over a large number of stocks, while the BBH is concentrated on just two stocks - Genentech Inc (ticker: DNA), which is 41 percent and Amgen (ticker: AMGN), which represents 24 percent. Given that DNA has rallied nearly 80 since early March, it is easy to see why the BBH has outperformed the IBB.

The graph of the major indices shows how some of the various groups are moving relative to the broad market indices. For the most part, we see a similar picture to what we saw on the ETFs with oil and gas near the top and some select technology near the bottom, while the broad-market indices are near the middle. The notable points here are housing and gold stocks. While there is an ETF that tracks the gold (the commodity), there is not a good proxy for gold stocks, which have struggled this year. Housing stocks also lack a good ETF representative, so it is worth noting that the housing index has been one of the better performers this year.

I also thought you might find it interesting to revisit the graphs I featured on April 1 that showed what groups led and lagged in the first quarter of this year.

Etf040105etfq1

Etf040105indexq1

As you might expect, these charts are similar to what we saw above, but by comparing them you can see what has strengthened or weakened in the last two months. For example, the Materials Sector SPDR (ticker: XLB)  was one of the top-performing ETFs at the end of the first quarter, relatively speaking, as it was holding a small gain. However, it is now one of the lagging groups on a year-to-date basis. I also think it is worth noting that energy-related groups were among the top performing sectors at the end of the first quarter and are still holding that position.

Finally, I want to revisit a chart that I have been tracking for the last few weeks....

Etf053105iwm

Here we see the familiar weekly iShares Russell 2000 (ticker: IWM) chart, along with its 20-week moving average. Last week I noted the IWM was challenging resistance and said a move above that area would negate some of my concerns about weakening momentum. As you can see, the small-cap group is so far pushing through the resistance and proving my concerns unfounded.

Nick Perry (regressionchannels@sir-inc.com)

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