Exasperated traders and investors are probably quite happy May
2012 has drawn to a close. The S&P 500 lost over 6%, good for
its worst monthly performance since September 2011. The Dow Jones
Industrial Average also lost more than 6% and the Nasdaq was off
over 7%, marking the worst monthly runs for those indexes in two
years.
On the back of another disappointing monthly jobs report, June
looks like it could follow in May's footsteps or be even worse.
In the past two days, the spate of critical U.S. economic data
points investors have absorbed reiterates the notion that the
economic recovery here is sluggish and fragile at best.
Slack GDP and employment figures also underscore the fact that
even though plenty of global and sector ETFs have already been
shellacked, there is still downside to be endured. That is to say
avoid or short the following quintet.
SPDR S&P Retail (NYSE:
XRT
)
There are still some compelling individual stories in the retail
space and in XRT's defense, its top two holdings are Expedia
(Nasdaq:
EXPE
) and Trip Advisor (Nasdaq:
TRIP
), two of the best-performing stocks in May. Despite the fact
that the ETF is down 8% in the past month,
investors have been seen pouring new cash into
the fund
.
On a technical basis, XRT has already retraced a significant
portion of its move to its 2012 high around $63 from its October
2011 low around $43, but this ETF will be in trouble if support
fails at $56. Regarding fundamentals, XRT's exposure to discount
retailers such as Wal-Mart (NYSE:
WMT
) and Dollar General (NYSE:
DG
) may keep the fund from being less bad in this environment, but
the recent economic data points indicate betting on retail ETFs
right now could prove hazardous to a portfolio's health.
Market Vectors Oil Services ETF (NYSE:
OIH
)
NYMEX-traded oil futures dropped 17% last month and are careening
lower again today thanks to the weak jobs number. Earlier this
week, the Energy Information Administration first-quarter demand
in the U.S. was at a 15-year low. Inventories here are at a
22-year high. Simply put, oil demand is not where it should be at
this point in an alleged economic recovery and with Chinese data
points offering no reason to smile, it's easy to see why oil
prices are plunging.
That's problematic for oil services stocks and ETFs such as
OIH and the iShares Dow Jones US Oil Equipment Index Fund (NYSE:
IEZ
) because oil services are often more intimately correlated to
oil futures than integrated names are. OIH has lost 14.5% in the
past month and if oil falls below $75 per barrel, another 8%-10%
could come off this fund.
SPDR S&P Homebuilders ETF (NYSE:
XHB
)
XHB and the rival iShares Dow Jones US Home Construction ETF
(NYSE:
ITB
) had been two of the more pleasant surprises among sector ETFs
this year, but both have been taken to the woodshed today and it
looks like sellers are concentrating more on XHB because volume
is above the daily average with two hours left in the trading
day.
The problem with XHB isn't just its home builders exposures,
it's allocations to the discretionary retail side of residential
real estate through stocks such as Williams-Sonoma (NYSE:
WSM
) and Pier One (NYSE:
PIR
), which could be vulnerable if the recovery continues to lose
steam. XHB could drop another 10% if it closes below $20
today.
iShares MSCI Netherlands Investable Market Index Fund
(NYSE:
EWN
)
It's probably not a surprise that the Global X FTSE Greece 20 ETF
(NYSE:
GREK
) was the worst-performing traditional long ETF last month and as
we predicted would happen
the yield on the iShares MSCI Spain Index Fund
(NYSE:
EWP
) has expanded significantly.
Not to mention, everyone and his sister knows the iShares MSCI
France Index Fund (NYSE:
EWQ
) and the iShares MSCI Italy Index Fund (NYSE:
EWI
) are a mess. But the Netherlands isn't being ignored. Stained
with the Euro Zone label, EWN has lost 13% in the past month and
is now trading at levels not seen since the fourth quarter of
2011.
EWN is almost 36% allocated to consumer staples names, so this
fund should be working right now. It's not and it's vulnerable to
a scenario when traders get tired of beating up on EWP, EWI and
EWQ, and go hunting for their next victim. EWN is a prime
candidate.
For profitable June ETF ideas, please click
HERE
.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.