ETF Update: No Sectors To Buy

Investors and traders alike can improve their understanding of the market by looking at specific sectors.  It is a great way of maintaining perspective, avoiding over-emphasis on the Dow or on individual stocks.

It can be a mistake to miss the forest while watching trees - or vice versa!  A sector focus is a good solution.

Looking at charts of the various sector ETF’s is one approach.  While this is not a substitute for fundamental analysis, it provides powerful visual evidence of the market’s verdict.  Our own rating system (TCA-ETF) combines Trends and Cycles with a touch of Anticipation in finding the most attractive ETF’s.  (For new readers, there is a more complete description of our methods at the end of the article.)

Nothing to Buy

As has been the case for several weeks, our ETF landscape lacks any tempting choices.  This has been the message since our Cash is King update from a month ago.  While some sector investors may be eager to get back into the market, the admonition to be patient has been basically correct.

Those whom we frequently cite for ETF analysis have reached similar conclusions.  It is interesting that Gary Gordon at ETF Expert is mentioning the SPDR Select Utilities Fund, (XLU).  While he avoids a market opinion, Gary notes that the utility ETF has less volatility than the overall market.

Our own ratings also show the iShares utility ETF (IDU) as the best of a bad lot.  It is still not close to a rating indicating the expectation of a positive return.

Weekly TCA-ETF Rankings

We have been out of the market for many weeks in our sector rotation fund, since the charter is basically long only.  For readers interested in our program, we have a long-only method and one that embraces more market timing.  Current reports are available to any interested reader — both the TCA-ETF method and the Gong Model.  Just use the “email me” link at the top left of the page.

We have never seen readings so negative.  Despite this, we have switched to neutral in the weekly Ticker Sense blogger sentiment poll, because of the signal from our Gong model.

As we stated in our last ETF report, we use the Gong signal to gain some exposure even though there are no sectors to buy.  On Friday, we bought a 40% position in SPY (SPY) and QQQQ (QQQQ) (20% each).  As the model generates specific sector signals, we will replace these holdings.

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