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) -- Two of the most bullish voices in the media include money manager Ken Fisher and Bob Doll, the chief equity strategist at Blackrock. Fisher experienced an epic "fail" by completely missing the 2007-2009 bear/financial collapse; he had little choice but to stick with a never-ending bullish theme to claim credit for calling the "turnaround."
Bob Doll has always been more measured; his accomplishments have less to do with Fisher-like marketing skill and more to do with nose-to-the-stone analysis. Nevertheless, if you follow Doll's weekly investment commentary, it's a similar "rub" to the one that you got when you listened to Goldman Sachs' perma-bull, Abby J. Cohen.
Why am I bringing up these prominent people of a certain age? Both Fisher and Doll have gone on record as expecting corrective activity for stocks. They remain long-term bullish, but are decidedly less enthusiastic about the immediate term.
Since both speakers are prone to "calling it wrong," does it really matter that the uber-bulls are getting nervous? In the present set of circumstances… yes. The reason? A monumental shift toward non-cyclical, defensive ETFs.
More money is pouring into SPDR Select Consumer Staples (XLP) and SPDR Select Health Care (XLV) than into economically cyclical sector ETFs. Specifically, over the last 20 trading days, advancing defensive stock volume has been far greater than declining defensive stock volume. In contrast, advancing cyclical stock volume has been far less than declining stock volume.
We can see this unfavorable near-term trend expressed as a percentage above or below a 20-Day simple moving average. While the S&P 500 itself may have broken out above the 1350 level, investors seem to be headed for perceived safer equity grounds.
|AD Volume Net %|
|Defensive ETFs||20-Day SMA|
|SPDR Select Consumer Staples XLP||21.30%|
|iShares Pharmaceuticals IHE||20.20%|
|iShares DJ Utilities IGU||18.20%|
|SPDR Select Utilities XLU||17.40%|
|iShares DJ Healthcare IYH||14.60%|
|Cyclical ETFs||20-Day SMA|
|SPDR Select Energy XLE||7.20%|
|SPDR Select Materials XLB||2.80%|
|iShares DJ Transports IYT||-4.70%|
|SPDR Select Financials XLF||-14.80%|
|iShares Networking IGN||-16.30%|
I'm not calling for a faith-shattering pullback in stock assets. Fund flow should continue to keep the broad-based indexes from seeing a full-fledged bear in 2011.
Nevertheless, volume breadth is weakest in the "we-believe-in-our-economy" sectors. When you add this reality to a number of other economic concerns (e.g., (a) falling copper and timber prices, (b) GDP disappointment, (c) debt ceiling debate, (d) Eurozone crisis reignited, (e) Japan and U.S. debt ratings, (f) end of QE2 in June, (g) gas at the pump, etc.), you might benefit from ETFs that represent foreign stocks.