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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
ETF Expert) -- Are you wondering if the market can go significantly higher by year end? Maybe your question should take the U.S. market's remarkable resilience into account.
S&P 500 has not closed in bear market territory. In fact, the large-cap barometer would have to close below 1096 to get there. Yet, with the exception of a few scary moments, the gauge has demonstrated its strong support at 1120. (It closed at 1195 on Tuesday).
Whether you put some cash to work today via dollar-cost averaging, or whether you are holding out for the mid-point (1170) of the 100-point trading range (1120-1220), you should have a "wish list" close at hand.
A wish list is critical for several reasons. One, it gives you the wherewithal to act in the face of higher-than-normal volatility. Second, it empowers you to recognize that the S&P 500 is unlikely to close below 1096 in 2011. (Note: I minimize the downside risk of "being wrong" by setting stop-limit loss orders.)
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So how do you develop your ETF wish list? One method is to set parameters on a comprehensive screen. You might use the one at WSJ.com or
ETFScreen.com -- I prefer the latter. It gives me the freedom to screen by relative strength, volume, moving averages, price and trendline crossovers.
Right now, for example, I am interested in ETFs that have demonstrated high "up" volume. In essence, with the markets rising dramatically in the last five days, I want an ETF that did so on better-than-average three-month volume.
A second criteria? I rarely consider investments that haven't climbed above a 50-day moving average. Last, I want an ETF with a bit of Q4 momentum -- one that can be found in the top third of the ETF universe on relative strength percentile rank.
On these three criteria, seven stock ETFs with sufficient dollar-trading volume ($500,000+) passed the screen:
For Your Consideration: 7 ETFs With Solid "Street Cred"
It should be noted that five of the ETFs that passed this test have yields that beat the 10-year treasury bond by 1.5% to 4.5% annually. Clearly, dividend payouts are garnering a great deal of attention -- from high-yield to health care to energy pipeline partnerships.
The other two -- IXN and VUG -- are probably capitalizing on
tech's traditional Q4 rally. Whether it actually happens or not remains to be seen.
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