ETF Report – One Sector To Avoid, One Sector To Consider (UYG, IYG, RKH, XLF, TIP, TLT, VCIT, VCLT, VGLT, IEF, VGIT, AGG)

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December 12, 2010 5:29pm NASDAQ:VCIT NASDAQ:VCLT

One of the first things I like to check every weekend is the ETF Trend Performance week-over-week report. It gives a great summary of what happened to more than 300 ETFs with respect to change


 in trend. (It is currently available at the free preview of Alert HQ Premium.)

Some weeks, ETFs in certain sectors dominate the top spots or the bottom spots and in other weeks it’s a mix. This week it’s pretty clear who the biggest winners and losers were.

The winners —

Financial ETFs held the top four spots this week. The following chart is from the report:

Change in Trend Score Symbol Name Current Trend Score Change in Price Percent Change in Price
3 (UYG) ProShares Ultra Financials ETF 5.5 4.05 6.71
2.25 (IYG) iShares Dow Jones U.S. Financial Services Index Fund 4.25 2.55 4.67
2 (RKH) Merrill Lynch Regional Bank HOLDRS 4 4.02 5.05
1.5 (XLF) Select Sector SPDR Fund – Financial 4.75 0.58 3.82

[ProShares Ultra Financials (NYSE:UYG), iShares Dow Jones US Financial Services (NYSE:IYG), Regional Bank HOLDRs (NYSE:RKH), Financial Select Sector SPDR (NYSE:XLF)]

Given the highest possible trend score is only 6 (denoting a very strong bullish trend), an improvement of between 2 and 3 is pretty significant.

The following chart shows IYG. Trend lines are drawn in blue. You can see that the down-trend seems to have ended and an up-trend seems to be solidly underway.

For these ETFs, even after a big gain in trend score, there is still room for further improvement.

The losers —

Bonds are clearly in trouble. The following 8 ETFs all registered a noticeable decline in trend score even while the overall stock market showed a weekly gain. The following chart list them all:

Change in Trend Score Symbol Name Current Trend Score Change in Price Percent Change in Price
-1 (TIP) iShares Lehman TIPS Bond Fund 3.25 -2.35 -2.16
-1 (TLT) iShares Lehman 20 Year Treasury Bond Fund 1.5 -1.74 -1.83
-1 (VCIT) Vanguard Intermediate-Term Corporate Bond ETF 3.25 -1.36 -1.7
-1 (VCLT) Vanguard Long-Term Corporate Bond ETF 2.25 -0.44 -0.56
-1.25 (VGLT) Vanguard Long-Term Government Bond ETF 1.75 -1.39 -2.26
-1.5 (IEF) iShares Lehman 7-10 Year Treasury Bond Fund 2.25 -2.41 -2.51
-1.5 (VGIT) Vanguard Intermediate -Term Government Bond ETF 2.75 -1 -1.6
-2 (AGG) iShares Lehman Aggregate Bond Fund 2.25 -0.96 -0.9

[iShares Barclays TIPS Bond (NYSE:TIP), iShares Barclays 20+ Year Treas Bond (NYSE:TLT), Vanguard Interm-Tm Corp Bd Idx ETF (NYSE:VCIT), Vanguard Long-Term Corp Bond Idx ETF (NYSE:VCLT), Vanguard Long-Term Govt Bd Idx ETF (NYSE:VGLT), iShares Barclays 7-10 Year Treasury (NYSE:IEF), Vanguard Interm-Tm Govt Bd Idx ETF (NYSE:VGIT), iShares Barclays Aggregate Bond (NYSE:AGG)]

Whereas the problems in the bond market started with municipals and 30-year Treasuries, you can now see that corporate bonds are getting hit, too.

Conclusion —

As much as I dislike the financial sector, perhaps a recovery is actually on the way and this isn’t a head fake. After all, these results are based on weekly data so perhaps the move has some real strength. We shall have to see.

As for the bond ETFs, in mid-October I wrote a post titled “Has the bond bubble burst? ETF trending provides a clue“. At that time I used daily data and the post met with some skepticism. Today’s trend score results provide confirmation that bonds aren’t getting any better.

Written By Trade Radar Operator 

About: I am a long-time individual investor with an engineering degree and an MBA. I worked in aerospace-defense for 15 years and have spent the last decade or so working for a large financial services firm. This academic, work and investing background helps me cast an informed eye on tech stocks, the stock market and the economy and also provides the skills needed to write the software that supports the various parts of the site.


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