Suspicious Tech Bounce
The tech-focused exchange-traded funds
led their peers Monday, but before getting too excited make sure you check the
relative strength lines and intermediate relative strength scores of these
securities. They have a long way to go before they’ll fit into a trend-following
strategy.
Meanwhile, as I pointed out in
Friday’s commentary, the market has yet to experience a sentiment catharsis
which would clear out the weak hands. Psychological
indicators have remained complacent throughout this vicious decline in
the big-cap tech shares. That bodes bearish.
The B2B Internet HOLDR
(
BHH |
Quote |
Chart |
News |
PowerRating)
jumped 8.0%, the day’s
biggest gain among the exchange-traded
funds. The basket of business-to-business Nets has a six-month
RS score of 1 and three-month RS score of 1, meaning it lagged 99% of all the
mutual and exchange-traded funds in the TradingMarkets FundScanner.
The B2B HOLDR’s relative
strength line tells the same story.
The Dow Jones Internet
iShares
(
IYV |
Quote |
Chart |
News |
PowerRating) rose 6.8%, the Internet Infrastructure HOLDR
(
HHH |
Quote |
Chart |
News |
PowerRating) 4.9%,
the Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating) 4.3%, the Telecom HOLDR
(
TTH |
Quote |
Chart |
News |
PowerRating) 4.0%, the Dow
Jones Telecommunications iShares
(
IYZ |
Quote |
Chart |
News |
PowerRating) 3.9%, the Wireless HOLDR
(
WMH |
Quote |
Chart |
News |
PowerRating)
3.7%.
On the downside, the Dow Jones
Large-Cap Growth streetTRACKS
(
ELG |
Quote |
Chart |
News |
PowerRating) lost 3.3%, the day’s biggest loss among
the ETFs. The Semiconductor HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating) gave up 2.7%, the Broadband HOLDR
(
BDH |
Quote |
Chart |
News |
PowerRating)
1.5%, the Dow Jones SmallCap Value streetTRACKS
(
DSV |
Quote |
Chart |
News |
PowerRating) 1.4%.
The top field of all daily charts in this
commentary displays price and volume on a logarithmic price scale
with a 50-day moving price average in
red. In the second field,
a blue relative strength line represents the displayed security’s price
performance relative to the S&P 500. The third field displays vertical daily
volume bars in black with a 50-day moving average in blue for volume.
Exchange-traded funds combine traits
of stocks and mutual funds. Like mutual funds, an ETF represents diversified
ownership in a number of different stocks, greatly reducing company-specific
risk. Like stocks, ETFs trade on exchanges, nearly all of them in fact trade on
the American Stock Exchange at present. They quote throughout the day, enabling
traders to take advantage of intraday price moves.
If you’re new exchange-traded funds,
be sure to visit TradingMarkets’ Knowledge Center,
dedicated to explaining the basics of trading and active investing in ETFs and
mutual funds. Just click on the Funds tab
near the top of this page, then click on the Knowledge
Center tab.
You also will find lessons on trading
exchange-traded funds in the Stocks Education area of TradingMarkets.com. In
particular, check out my three-part series on trading ETFs, starting with
Average Crossovers. I also recommend newcomers read my tutorial,
HOLDRs: Unique Opportunity And Risk.