ETFs on the Move – Sectors and Strategies

by ETF Base on September 19, 2010

Each week I publish the week’s hottest ETFs across various sectors and employing various strategies.  For the prior week, we saw the S&P500 (SPY) gain 1.4%, while gold bullion (GLD) touched a new record.  Meantime, Treasuries sold off a bit and mortgage rates crept up, which is of no help to an anemic housing market.  In the political spectrum, there were some surprise wins by Tea Party candidates which begged the question as to whether that bodes well for Dems by splitting the Republican party or whether it’s sign that voters are fed up with Dems altogether.  Market volume may continue to be low and range bound until we know for sure after mid-terms later in the year.  With this backdrop, the hottest ETFs from last week across various sectors and strategies were the following:

Conventional ETFs:

PSI – Powershares Semiconductors – Up 7% – Semiconductors were very strong last week in an overall up market, one that realizes that while jobs may not be coming back, companies are putting cash to use on productivity improvements (Tech).  This ETF is pretty broadly spread across dozens of chip and telecommunications companies.  While it was a strong week for semis, overall this year, performance has been rather weak, down 8% YTD vs. a flat S&P500.

SGG – Barclays iPath Sugar – Up 7% – Sugar prices continued to surge again this week (SGG has made this list several times now), and this exchange traded note (ETN) has benefited tremendously from the continued trend upward we’re seeing in select commodities.  In the case of SGG, the trend has been up 7% in a week, up 25% in a month and up 60% over the prior 3 months.

INP – iPath MSCI India ETF – Up 5% – India’s been getting a lot of press of late, now widely expected to overtake China’s growth rate, with India’s annual economic growth rate pegged at 9% over the next 5 years.  With major concerns over social unrest in China, massive wage inflation and a possible real estate bubble ready to burst there, emerging market funds are starting to look a bit safer in India.  YTD in 2010, INP is up over 12%.

Leveraged ETFs:

SOXL – Direxion Semiconductor Bull 3X – Up 17% – As mentioned above, semis had a strong week, so it stands to reason that the 3X leveraged ETF will have had a standout week.  SOXL is a relatively new launch that performs as we’d expect for all leveraged ETFs – as long as the underlying trend is up, it performs strongly, but over long periods of time, volatility wipes out the gains, even in a flat underlying proxy market.

AGQ – Proshares Ultra Silver – Up 9% – Silver has been extremely strong, as many actually prefer silver over gold, and you couldn’t help but notice the headlines this week with gold hitting new highs.  With the action in gold and silver, investors should keep their eyes out for various gold pairs trades with the numerous ETFs out there now, platinum ETFs included.  The whole complex opens itself up to some market inefficiencies that are worth exploiting occasionally.  AGQ, a 2X leveraged silver ETF is up 27% in the prior month and 35% on the year.  For a non-leveraged silver option, investors should consider (SLV).

EDC – Direxion Emerging Markets Bull 3X – Up 6% – Emerging markets have been performing quite strongly on the year in a virtual sideways market for the US and Europe.  With many investors turning their backs on the US fearful that Obama wrecked the economy and Austerity likely to crimp growth in the developed world, emerging markets hold the only remaining potential for growth.  Not only have BRIC economies continued to thrive but there are new consumer classes emerging where output used to rely primarily on the US and Europe.  Over the prior month, EDC is up 13% and 21% over the prior 3 months.

Disclosure: Author is long various gold investments including GLD.

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