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TheStreet Open House

Three Consumer Sector ETFs for Some Safety

Stocks in this article: IYC XLP XLY WMT DIS HD MCD KO PG

NEW YORK (TheStreet) -- One of my investment themes is to consider a buy-and-trade strategy using exchange-traded funds. This concept should be considered in the three consumer sectors followed by www.ValuEngine.com: consumer staples, consumer discretionary and retail-wholesale.

Stock picking has become difficult recently as several retail stocks were taken to the woodshed between Thanksgiving and Christmas on earnings disappointments, while consumer-related ETFs continued to trade higher.

On Dec. 26, I wrote two stories covering retail stocks. The first was Dollar General and Foot Locker Are the Retail Winners Since Thanksgiving. Three of nine stocks mentioned in the article traded slightly lower between Thanksgiving eve and Christmas eve. The headliners posted gains of 7.2% and 5.8%.

In the second post, Ulta Salon, Express Fall 25% Since Thanksgiving, all nine stocks mentioned traded lower, six by double-digit percentages between 12.7% and 26.5%.

ValuEngine doesn't calculate fair values for ETFs and gives all ETFs a hold rating. Given sector valuations and distributions of buy, sell and hold ratings, I provide my judgment as to ETF weightings -- overweight, equal-weight or underweight.

iShares Consumer Services (IYC)($120.13) set a new all-time intra-day high at $121.97 on Dec.30 and traded up from $119.33 to $120.68 between Thanksgiving and Christmas. The ETF includes Dow components Wall-Mart (WMT), Disney (DIS), Home Depot (HD) and McDonald's (MCD).

Most of the components are in the retail-whole sector which I rate overweight. The consumer-services ETF is up 35% over the last 12 months and is well above its 200-day simple-moving average at $108.25.

The ETF had a positive but overbought weekly chart profile with its five-week modified moving average at $118.87 in a chart pattern that has become parabolic. Semiannual and annual value levels are $117.62 and $95 with monthly and quarterly risky levels at $123.45 and $126.02.

SPDR Consumer Staples (XLP) ($42.21) set a new all-time intra-day high at $43.46 on Nov. 18 before Thanksgiving and traded down slightly from $43.08 to $42.57 between Thanksgiving and Christmas. This ETF includes three Dow components: Coca Cola (KO), Procter & Gamble (PG)and Wal-Mart.

I give the consumer-staples sector an overweight rating. The ETF is up 18.7% over the last 12 months and is above its 200-day SMA at $41.18 vs. the consumer-staples sector which is up 13.9%. The ETF will shift to a negative weekly chart profile with a close this week below its five-week MMA at $42.44. My annual value levels are $40.69 and $36.53 with a monthly pivot at $41.63 and semiannual and quarterly risky levels at $43.27 and $44.13.

SPDR Consumer Discretionary (XLY) ($65.93) set a new all-time intra-day high at $66.85 on Dec. 31 and traded up from $65.54 to $66.09 between Thanksgiving and Christmas. This ETF includes three Dow components: Disney, Home Depot and McDonald's.

I give the consumer-discretionary sector an equal-weight rating. The ETF is up 35.6% over the last 12 months and is above its 200-day SMA at $59.37 vs. the consumer-discretionary sector which is up 20.8%.

The ETF has a positive but overbought weekly chart profile with its five-week MMA at $65.20 in a parabolic formation. My semiannual and annual value levels are $63.58 and $51.78 with a semiannual pivot at $65.13 and monthly and quarterly risky levels at $68.27 and $69.16

At the time of publication, the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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