NEW YORK ( ETF Digest) -- The consumer sector overall is said to comprise nearly two-thirds of U.S. GDP growth. For that reason alone focusing on the conditions of this sector is important for all investors. The list of ETFs available is growing and the indexes they're related to can be quite different one to the next. Some issues are new and have yet to gain wide support despite being well structured with a linked index and low fees.
One strange thing you might discover is some popular ETFs have holdings and weightings which are surprising and not intuitive despite good looking charts. For many investors, knowing what you own or wish to own is important. Retail and related consumer issues (excluding Consumer Staples) can offer dramatic examples of what's under the hood and perhaps offer some surprises.
Let's look at a variety of these ETFs with their top holdings and see if from a fundamental view they meet the test of what you think you'd find under the hood. Then we'll view current technical market conditions and trends as they apply to each.
ProShares and DirexionShares have leveraged long and inverse issues for those investors wishing to hedge or speculate.We rank the top 10 ETF by our proprietary stars system as outlined below. However, given that we're sorting these by both short and intermediate issues we have split the rankings as we move from one classification to another.
Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity
Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average where and if enough data is available. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach. Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions. For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.
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