ETFs Hitting Their Bullish Stride

The market is taking a bit of a breather, pulling back from its record highs on bad retail news. But there are some exchange-traded funds that are still technically bullish and not too exposed to the current consumer distress.

To make the list of technically bullish exchange-traded funds, the ETF has to have reached a new 52-week high within the past five days. Plus, the five-day moving average must be above the 10-day moving average. And lastly, the moving average convergence-divergence indicator needs to have given a fresh "buy" signal within the last 10 days.

Unlike, last month's article, "A Look at Funds Hitting 52-Week Highs," this article includes only ETFs because they are more appropriate than open-end mutual funds for short-term trading strategies.

After weeding out the weaker buy signals and ETFs with excessive retail exposure, three groups of funds emerged: country specific, metals and materials, and telecommunications.

Three country funds appear particularly bullish. From highest to lowest rated, iShares MSCI Mexico (EWW Quote) is rated with an A, iShares MSCI Brazil (EWZ Quote) is rated A-, and iShares MSCI South Korea (EWY Quote) is rated C+. These funds hold securities that are the least impacted by overstretched U.S. consumers.

It is not unusual for groups of stocks within an industry to move together. When this happens, multiple funds covering the same stocks may break out simultaneously. In the next group of funds, Du Pont (DD Quote) and Dow Chemical (DOW Quote) are the top two largest holdings.

The three bullish materials funds with overlapping holdings are the Vanguard Materials(VAW Quote) ETF with a B+ and Materials Select Sector SPDR(XLB Quote) and iShares Dow Jones U.S. Basic Materials (IYM Quote), both of which earned B ratings. Riding the same wave of raw material demand is the SPDR Metals & Mining ETF (XME Quote), which is unrated for lack of sufficient trading history.

Lastly, two telecom funds are looking especially bullish. The Vanguard Telecommunications Services(VOX Quote) ETF earned our top rating of A+, while Telecom HOLDRs (TTH Quote) scored a respectable B+. Both of these funds have the same top three holdings: AT&T (T Quote), Verizon Communications (VZ Quote) and Sprint Nextel (S Quote).

Now, here are a few words of caution: Don't overexpose yourself to any one sector. The country funds move independently of each other, but avoid buying more than one material or telecom fund.

Many of the above funds fell with the market on Thursday and might provide attractive entry points on Friday. But if Thursday's market dip becomes Friday's market dive, it might be the wrong time to play the upside. So be sure to keep you stops tight. Good luck.