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.By David Gillie for ETF Digest
All issues are average daily volume greater that 300K.
Top Performers this week
With Homebuilders securing the 5th and 6th, performance slots this week (even beating out the usual mega bulls) we can see their December pop wasn't a mere one hit wonder. Granted, they may not be building homes, but rather apartment buildings, and converting condos into apartments, but they're working--and that's good news.
In nearly a dead heat with Homebuilders, Regional Banks have finally proven themselves as non-toxic apart from their larger brethren. Regional banks are in the legitimate banking business of writing qualified mortgages, making loans to small businesses and doing what banks are supposed to do. They don't have exposure to risky European debt, they're not leveraged 40:1 and their executives are not paid gross salaries as their customers' life savings are gambled at the casino with an assured backstop of taxpayers' dollars.
Finishing out the top echelon, Biotech has captured the interest of investors looking ahead for 2012.
The biggest encouragement in this line-up is that investors are actually giving thought to individual sectors rather than just running with mega bull / bear positions as has been the case in the confusion and volatility of the past six months.
KBWB is a new issue and would naturally have a "new high" as it has no past performance to beat. But even so, it's in the Regional Banking industry and that's encouraging.
The real story in the new highs is IBB. Virtually all of its performance of the year has been in the past three months with steady and strong weekly gains. IBB is currently overbought, but it should be on your ETF watch list.
New Lows The mega bears got a blistering punishment betting against Santa Claus. Natural Gas continues making new lows but appears to be slowing the descent. UNG should be interesting to watch if it shows a bottoming process.
IBB and KBE are on every radar screen. Although overbought this was no accidental melt-up. They have conviction volume behind them.
VIX inverse is more of a meltdown than overbought. The VIX took a slight bounce off the 20 complacency level this morning as it did in December, but options action are not indicating expectation of near term heightened volatility.
A continuation of the VIX story--although the ETF issues are oversold, the relative volume indicates it more due to disinterest than heavy selling. The VIX will be a more interesting story if it slides below 20.
Relative volume is probably the most insightful table for this week. The S&P Value Index (IVE) is at 4x its normal volume. Sure, previous low volume may be a contributing factor, but Value investors (The Buffet Crowd) are long-term holders. This gives us some indication of a degree of confidence in the market. Another shred of confidence is hard selling of short (inverse) Emerging Markets positions which gives a feel for global markets. Once again we see Regional Banks, Biotech and Homebuilders on the radar. Volume is all about conviction. These three areas are being bought with conviction. AMLP is a double winner for investors. As one of the best dividend positions, it also is in the Energy Sector which looks to be making a trend reversal turning upward. Another surprise is Private Equity (PSP) often referred to as "Smart Money". There may be some factor of PSP's growth that money is difficult to get from banks. However, this is investment capital. This could show us that businesses are starting to invest in growth. This will be an important ETF to watch to get the pulse of global economies.
Trending Up (sorted by best weekly performance) There's more confirmation this week that Financials are not a fluke, but rather have turned the corner. We also see a new player in the game. China, the elephant in the room, has quietly made a turnaround.
Trending Down (sorted by poorest weekly performance) The story in Europe is by no means over. France has large exposure to the worst of European sovereign debt and has suffered downgrading by the rating agencies. The Solar Industry has been roughed up badly by political scandals, but as crude prices rise, we'll likely see some renewed interest in solar. Although all of these issues are trending downward, none of them have hit the oversold levels on the RSI so it's unlikely we'll see a snap reversal any time soon.
Our Midweek peek is generally encouraging. Consider putting Biotech (IBB), Regional Banks (KBE), Homebuilders (XHB), Private Equity (PSP) and China (FXI) on your watch list. -- Follow my intraday market commentary on Facebook and Twitter