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Trend Remains Favorable For Defensive Equity ETFs and Yield-Oriented ETFs

20 October 2011 at 3:20 pm by Gary Gordon     Bookmark and Share    Follow EtfExpert on Twitter

Many¬†folks are “banking” on a year-end rally. The catalyst? The European Union¬†(EU) will¬†come up with a massive recapitalization (a.k.a. bailout) of their¬†financial institutions.

In theory,¬†if¬†we no longer need to fret the collapse of the¬†EU — the solvency of¬†member nations, the functionality of its banks, etc.¬†–¬†investors should be able to return to¬†corporate earnings. And most should like what they see in the overall scheme of things — profitability,¬†reasonable debt levels, revenue growth and plenty of cash.

That said,¬†current trends still suggest a more cautious equity posture. Specifically,¬†I checked two basic criteria in a recent screening: (1)¬†Non-Bond ETFs that are less than 10% off 52-week highs and (2) Non-Bond ETFs with prices that climbed above¬†a 100-day simple moving average. The first criterion intended to capture¬†ETFs that were no longer in a “10% correction” mode;¬†the second criterion sought to identify a bullish signal with¬†the current price rising above an intermediate-term trendline.

There were about 45 ETFs that made the cut. Taking the screen one step further, I wanted to view only those ETFs that made the top quartile in relative strength percentile rank. In essence, these are the funds across the field of 1300 that may have the best momentum.

Roughly 25 ETFs cleared the last hurdle, forming 3 clusters: (1) Defensive Equity ETFs, (2) Higher-Yielding Equity ETFs and (3) Tech/Biotech ETFs. I’ve listed the assets in the groups below.

Group 1. Defensive Equity ETFs
 
Utilities HOLDRs (UTH)
Select SPDR Utilities (XLU)
Vanguard Utilities (VPU)
iShares DJ Utilities (IDU)
Rydex Equal Weight Utilities (RYU)
Select SPDR Consumer Staples (XLP)
Vanguard Consumer Staples (VDC)
Guggenheim Defensive Equity (DEF)
iShares DJ Consumer Goods (IYK)
 
Group 2. Higher-Yielding Equity ETFs
 
iShares High Dividend Equity (HDV)
UBS Alerian MLP Infrastrcuture (MLPI)
Frist Trust Morningstar Dividend (FDL)
UBS MLP Wells Fargo ETN (MLPW)
WisdomTree High Yield (DHS)
WisdomTree Dividend EX Financials (DTN)
iShares High Yield Dividend Achievers (PEY)
JP Morgan Alerian MLP (AMJ)
iShares DJ Select Dividend (DVY)
ALPS Alerian MLP (AMLP)
 
Group 3. Tech/Biotech ETFs
 
Internet HOLDRs (HHH)
Biotech HOLDRs (BBH)
PowerShares NASDAQ 100 (QQQ)
Software HOLDRs (SWH)
Select SPDR Technology (XLK)

 

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Disclosure Statement: ETF Expert¬†is a web log (‚ÄĚblog‚ÄĚ) that makes the world of ETFs easier to understand. 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. You may review additional ETF Expert disclosure details here.

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