7 ETFs Should Conditions Continue to Improve

Since 7/25/2011, market participants have been dealing with extraordinary volatility. In fact, for the past 11 weeks, the CBOE Volatility Index (VIX) hadn’t closed below a 50-day moving average.

Until now, that is. On 10/10/2011, the current price of the VIX closed below a key trendline.

 

 

In a similar vein, the S&P 500 hadn’t closed above a 50-day MA since 7/27/2011. Again… until now. (See chart below.) It has taken nearly the same 10+ weeks for U.S. stocks to demonstrate that a reversion to a bull market mean may yet be a possibility.

 

Considering just how many day traders, hedge funds and programs use simple moving averages to determine “buys” and “sells,” the simultaneous cross-overs are significant. On the other hand, investors are still caught in a S&P 500 range between an official bear (1096) and the end of corrective activity (1233); that is, the S&P 500 closing at 1194 merely represents ”a good start.”

Granted, Germany and France presenting a unified front for recapitalizing European banks is reason for cheer. That said, the logistics for a TARP-like response for protecting “too big to fail” financial institutions is still sketchy.

What do I mean? Well, if the joint announcement over the weekend were really enough to put the concern over the PIGS (Portugal, Italy, Greece, Spain) to rest, banks would ease up on their willingness to lend to one another. However, intra-bank lending is still a huge problem; 3-month LIBOR rates moved higher on 10/10/11, and have not stopped climbing since the third week of July.

 

Okay, so 2 out of 3 ain’t bad. Nevertheless, it’d be premature to stick a fork in a correction or a bear without credit flowing freely in the eurozone.

I am encouraged… don’t get me wrong. Yet I may be more apt to revisit some of the better-performing assets over the prior 3 months that were only recently trashed for cash. Put another way… which investments deserve the “baby” moniker in the “don’t throw the baby out with the bathwater” phrase.

Here are 7 ETFs that have been recently trashed for cash, yet demonstrate impressive relative outperformance over a 3-month period:

Relative Performance Stand-Outs That Suffered Recent Sell-Offs
						3-Month Approx %
SPDR Gold Trust (GLD)						6.78%
Internet HOLDRs (HHH)						2.94%
SPDR Select Sector Utilities (XLU)						2.50%
PowerShares Emerging Sovereign Debt (PCY)						-0.28%
WisdomTree Small Cap Japan Dividend (DFJ)						-0.68%
Market Vectors Gold Miners (GDX)						-0.75%
iShares High Dividend Equity (HDV)						-1.00%
iShares S&P 500 (IVV)						-8.53%