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Are Financial ETF’s Telling Us Where The Market Is Headed?

December 8th, 2009

which-way“A look at the Financial Select Sector SPDRs (NYSEArca: XLF) shows that financial stocks peaked on October 14th. The direction since has more or less been down. On October 26th, XLF fell below its 200-day Moving Average. Since then, (XLF) has closed below the MA about 90% of the time and sits clearly below it right now,” Simon Maierhofer Reports From ETF Guide.

“The same is true for the Vanguard Financial ETF (NYSEArca: VFH) and iShares Dow Jones US Financial Sector ETF (NYSEarca: IYF).  But wait, there’s more! The SPDR KBW Bank ETF (NYSEArca: KBE) has been lingering below its 200-day MA for over 30 consecutive trading days. The main components of KBE are Bank of America, Citigroup, JP Morgan Chase, and Wells Fargo; the same banks that led the 2008 meltdown,” Maierhofer Reports.

“Some swear by moving averages, others prefer to ignore them.  So what’s the significance of the MA? When you boil it down to the basics, the MA is basically a trend indicator. As long as indexes stay above the MA, the trend is up. Once they turn down, the trend may have changed. As with any other indicator, the MA is not foolproof. There’ve been numerous times in the past when the MA gave a false signal,” Maierhofer Reports.


Other factors to be considered in addition to the MA are:

1) Stocks rallied 65% in less than nine months.
2) Based on buying climaxes, stocks are moving from strong hands to weak hands.
3) Volume has been contracting for weeks and has reached some of the lowest levels in 2009.
4) Based on long-term valuation metrics, stocks are overvalued.

See The Full Story: HERE

The investment (XLF) includes companies from the following industries: banks, diversified financials, insurance and real estate. The fund will normally invest at least 95% of its total assets in common stocks that comprise the relevant Select Sector Index. This fund has adopted a policy that requires it to provide shareholders with at least 60 days notice prior to any significant material change in its policy or its underlying index. It is nondiversified.

TOP 10 HOLDINGS ( 56.05% OF TOTAL ASSETS)  
 
Company Symbol % Assets
AMER EXPRESS INC (AXP) 2.83
BK OF AMERICA CP (BAC) 10.28
BANK OF NY MELLON CP (BK) 2.45
CITIGROUP INC (C) 4.43
GOLDMAN SACHS GRP (GS) 6.62
JP MORGAN CHASE CO (JPM) 12.11
METLIFE INC (MET) 2.19
MORGAN STANLEY (MS) 2.95
US BANCORP (USB) 2.94
WELLS FARGO & CO NEW (WFC) 9.25

Chart for Financial Select Sector SPDR (XLF)

The investment (VFH) seeks to track the performance of a benchmark index. The fund employs a passive management investment approach designed to track the performance of the MSCI U.S. Investable Market Financials index. This index consists of stocks of large, medium-size, and small U.S. companies within the financials sector. This sector is made up of companies involved in activities such as banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, financial investment, and real estate. It is nondiversified.

TOP 10 HOLDINGS ( 41.77% OF TOTAL ASSETS)  
 
Company Symbol % Assets
AMER EXPRESS INC (AXP) 1.87
BK OF AMERICA CP (BAC) 8.1
BANK OF NY MELLON CP (BK) 1.99
Berkshire Hathaway Inc. B N/A 2.21
CITIGROUP INC (C) 2.16
GOLDMAN SACHS GRP (GS) 4.94
JP MORGAN CHASE CO (JPM) 9.14
MORGAN STANLEY (MS) 2.13
US BANCORP (USB) 2.45
WELLS FARGO & CO NEW (WFC) 6.78

Chart for Vanguard Financials ETF (VFH)

The investment (IYF) seeks investment results that tracks Dow Jones U.S. Financials Index. The fund generally invests at least 90% of assets in securities of the underlying index and depositary receipts representing securities of the underlying index. It may invest the remainder of assets in securities not included in its underlying index but which BGFA believes will help the fund track underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA. The fund is nondiversified.

TOP 10 HOLDINGS ( 43.67% OF TOTAL ASSETS)  
 
Company Symbol % Assets
AMER EXPRESS INC (AXP) 2
BK OF AMERICA CP (BAC) 8.21
BANK OF NY MELLON CP (BK) 1.94
CITIGROUP INC (C) 4.12
GOLDMAN SACHS GRP (GS) 4.46
JP MORGAN CHASE CO (JPM) 9.66
MORGAN STANLEY (MS) 2.15
US BANCORP (USB) 2.34
VISA INC. (V) 1.78
WELLS FARGO & CO NEW (WFC) 7.01

Chart for iShares Dow Jones US Financial Sector (IYF)

The investment (KBE) seeks to replicate the performance of the KBW Bank index. The fund uses a passive management strategy designed to track the total return performance of the Bank index. It is nondiversified.

TOP 10 HOLDINGS ( 58.77% OF TOTAL ASSETS)  
 
Company Symbol % Assets
BK OF AMERICA CP (BAC) 8.98
BANK OF NY MELLON CP (BK) 4.3
BB&T CP (BBT) 4.37
CITIGROUP INC (C) 8.19
JP MORGAN CHASE CO (JPM) 7.25
M&T BANK CORP (MTB) 4.04
REGIONS FINANCIAL CP (RF) 4.5
SUNTRUST BANKS (STI) 4.37
US BANCORP (USB) 6.22
WELLS FARGO & CO NEW (WFC) 6.55

 

Chart for SPDR KBW Bank (KBE)

 

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NYSE:IYF, NYSE:KBE, NYSE:VFH, NYSE:XLF


 

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