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Tuesday, June 2, 2009

Sector ETFs showing the most strength - signs this rally has legs?

If you're wondering how broad based the current rally is, this post will highlight some of the sectors that are showing the most price momentum and strength in their up-trends.

We evaluate a selection of what I call "Benchmark ETFs" as proxies for various market sectors. The following list is based on daily data. All these ETFs are showing strong bullish readings for Aroon and DMI which we use to determine how strong a stock or ETF's trend is. In addition, these ETFs are all above their 20-day moving average.

Benchmark ETFBenchmark Index
EEMMSCI Emerging Markets Index
FXIFTSE/Xinhua China 25 Index
IGWDow Jones U.S. Semiconductors Index
IJHS&P MidCap 400 Index
IWFRussell 1000® Growth Index
IWORussell 2000® Growth Index
IWPRussell Mid-Cap® Growth Index
IYCDow Jones U.S. Consumer Services Index
IYMDow Jones U.S. Basic Materials Index
IYWDow Jones U.S. Technology Index
IYZDow Jones U.S. Select Telecommunications Index
QQQQNASDAQ-100® Index

Many of these are no surprise if you are an enthusiastic follower of stock market news. Much has been made of how Emerging Markets have been on a tear and how Materials have been surging. You probably also know that Technology and the NASDAQ led the market up over these last few months since the March lows.

What is somewhat surprising, however, is that the Financial sector is not found on this list. Financials are in the news constantly and many have been recovering from deep declines. Recently, however, the sector has been lagging and the Aroon trend indicator has been weakening.

Another interesting aspect of this list is that there is a pretty fair weighting toward small cap and mid cap and a heavy weighting toward growth. It is often said that these kinds of stocks tend to be the leaders when coming out of bear markets.

So it is clear that we have a wide selection of sectors showing strength at this time. Tech, small cap and mid cap with a smattering of cyclical and large cap. It's a broad based variety that would seem to indicate we have left the bear market lows behind. With leadership from this group of benchmarks it isn't hard to feel bullish. Now if the economy just cooperates...

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