The S&P 500 is down more than five percent since Election
Day. Investors are petrified about the consequences of the fiscal
cliff. Riskier assets have been shellacked, but some conservative
hideouts, namely the telecommunications and utilities sectors,
have failed investors as well.
This year's markets leaders such as high-flying tech giants
) and Google (NASDAQ:
) have also recently been taken to the woodshed. If there is a
silver lining, it is that markets have a tendency to overreact to
potentially ominous events such as the fiscal cliff. Investors
need only remember last year's debt ceiling debate to recall how
out of sorts markets can get because of political gridlock.
In other words, the recent pullback in stocks may be a buying
opportunity. There are no guarantees about that, but it is clear
will be worth trading this week.
Utilities Select Sector SPDR (NYSE:
In an environment where low-beta utilities stocks and ETFs should
be, at the very least, less bad than the broader market, these
names are actually downright dreadful. XLU
has failed investors looking for some shelter
from the post-election storm as the fund has dipped 6.6 percent
in the past month.
XLU and the utilities space at large has been hit by a
double-whammy. First, there is the obvious concern about the
fiscal cliff and the increased dividend taxes that comes along
with it. Second, U.S. utilities are richly valued, perhaps too
much so, making these stocks and ETFs prime destinations for
eager short sellers. XLU might be a bounce back play or it could
be no more than a falling knife.
Market Vectors Retail ETF (NYSE:
With Black Friday looming,
often overlooked RTH
will be stepping into the spotlight. One of the year's
top-performing retail/discretionary ETFs has fallen on hard times
in recent weeks, sliding from $46 to the $43 area.
Exposure to e-commerce names is partly to blame, but three
stocks will chart RTH's near-term course: Wal-Mart (NYSE:
), Home Depot (NYSE:
) and Amazon (NASDAQ:
). That trio represents a third of the ETF's weight.
iShares Dow Jones US Home Construction Index Fund (NYSE:
Few sector funds have been able to keep pace with the iShares Dow
Jones US Home Construction Index Fund and the rival SPDR S&P
Homebuilders ETF (NYSE:
) this year. In the case of ITB, the fund has surged a
jaw-dropping 65.1 percent year-to-date. That is nice, but this is
a "what have you done for me lately" kind of of world and what
ITB has done lately is put bulls the ringer.
ITB is off 3.7 percent in the past week and has fallen through
critical support as well as its 50-day moving average. Buyers
need to step in soon to save ITB or the ETF could incur downside
of another eight to 10 percent.
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