Don Dion's Weekly ETF Blog Wrap

NEW YORK (TheStreet) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his RealMoney blog, anticipating which ETFs will be in play next. This week, among his blogs featured below, he wrote about real estate and housing ETFs, bundled products and the U.S. Natural Gas fund.

Real Estate and Housing ETFs Near the Top

Posted 8/10/2009, 1:35 p.m. EDT

Real estate and housing ETFs are in the most damaged sector of the American economy and running neck and neck with consumer sectors for the title of worst sector going forward, yet they nonetheless enjoyed a spectacular bounce. A broader short-selling rebound in some of the most beaten-down stocks (AIG(AIG Quote) doubled last week) contributed to a frenzy in the sector.

iShares Cohen & Steers Realty Majors(ICF Quote) climbed 42% in the past month, the best of the broad REIT ETFs. Vanguard REIT(VNQ Quote) advanced 40%, while iShares Dow Jones U.S. Real Estate(IYR Quote) gained 38% and SPDR DJ REIT(RWR Quote) added 39%. iShares Dow Jones U.S. Home Construction(ITB Quote) and SPDR S&P Homebuilders(XHB Quote) enjoyed returns north of 40%.

Improved credit conditions benefited REITs this spring and summer, but there are still clouds ahead with more than $150 billion in debt that needs to be rolled in the next four years. Any setback in the economy could trigger another wave of selling. Housing has shown signs of improvement recently and credit conditions are also favorable as long as rates stay low.

These ETFs all show improved long-term momentum, with the housing ETFs showing more strength than the REIT ETFs. Still, none have momentum that exceeds that of the broader market.

In the short run, real estate and housing ETFs are at or near the top. I've seen these outbursts of momentum come and go among the weaker sectors and rarely do funds stage a continuous rally from the bottom to the top -- even in bull markets.

My firm recently added IYR in two of our momentum-based portfolios due to technical strength, but this position may be reversed quickly.

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