Tech, Financial ETFs Rally
The tech-focused exchange-traded funds
Friday led a broad rally in the ETFs. Strong action in financial ETFs
bolstered the credibility of the rally.
However, this market has some sorting
out to do. November payroll data supporting the case for Fed easing kicked off
the rally. For more on the chances of easing interest rates, see Tony
Crescenzi’s commentary.
Later in the day, we got Florida trial court rulings that favored the
presidential aspirations of George Bush and seemed to raise the prospect of an
end to the election uncertainty.Â
However, after the market closed, the
Democrat-dominated Florida Supreme Court wrecked hopes for a resolution of the
presidential impasse by granting Gore’s appeal for a manual recount. That action
threw down the gauntlet to the Republican-dominated Florida Legislature, which now
appears determined to appoint its own slate of electors.
The Internet Infrastructure HOLDR
(
IIH |
Quote |
Chart |
News |
PowerRating)
gained 13.0%, the day’s largest gain among the exchange-traded
funds. Among its components, Akamai Technologies
(
AKAM |
Quote |
Chart |
News |
PowerRating) jumped
14.6%, Inktomi
(
INKT |
Quote |
Chart |
News |
PowerRating) 16.1%, InterNAP Network Services
(
INAP |
Quote |
Chart |
News |
PowerRating) 17.9%,
Kana Communications
(
KANA |
Quote |
Chart |
News |
PowerRating) 15.9%.Â
The top field of all charts in this
commentary uses a logarithmic price scale and displays a 50-day price average in
red. In cases where the displayed has traded long enough, the top field also
will exhibit a 200-day moving price average in black. 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 with a 50-day moving average in blue for volume.
The Semiconductor HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating)
advanced 11.1%, aided by a 5.2% gain in Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) despite an overnight
sales warning from the chip giant. For a look at Intel’s chart, as well as my
analysis of healthy basing action in Ciena
(
CIEN |
Quote |
Chart |
News |
PowerRating) and King Pharmaceutical
(
KG |
Quote |
Chart |
News |
PowerRating),
see my Trading
The News commentary.
Among the other tech-focused ETFs, the
B2B HOLDR
(
BHH |
Quote |
Chart |
News |
PowerRating) rose 10.4%, the Dow Jones Internet iShares
(
IYV |
Quote |
Chart |
News |
PowerRating) 8.9%,
the Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating) 7.6%, the Broadband HOLDR
(
BDH |
Quote |
Chart |
News |
PowerRating) 7.5%, the
Internet HOLDR
(
HHH |
Quote |
Chart |
News |
PowerRating) 7.3%, the Technology SPDR
(
XLK |
Quote |
Chart |
News |
PowerRating) 4.9%, the Nasdaq
100 Tracking Stock
(
QQQ |
Quote |
Chart |
News |
PowerRating) 3.9%.
During adverse markets, rising
relative strength scores and rising relative strength lines can help you spot
the next leaders. If you trade long (i.e., buy securities), the name of the
game, of course, is to buy before the next big advance. In a downtrending
market, many stocks with a proclivity to appreciate will trade sideways while
the majority of their peers fall. As a result, their RS lines and scores will
increase, simply because they are holding up against the general downturn, or at
least are not depreciating as fast in percentage terms.
Notice how the Biotech HOLDR’s RS line
has been rising the past three weeks while many of the other tech-focused ETFs
have flat or downtrending RS lines despite their recent rally. I have yet to see
much in the way of healthy basing among the Biotech HOLDR’s component stocks,
but the RS line is encouraging.Â
Among the rate-sensitive funds, the
Dow Jones Financial iShares
(
IYF |
Quote |
Chart |
News |
PowerRating) and the Financial SPDR
(
XLF |
Quote |
Chart |
News |
PowerRating) both rose
2.9%. The Dow Jones Financial Services iShares
(
IYG |
Quote |
Chart |
News |
PowerRating) added 2.4%, the
Regional Banking HOLDR
(
RKH |
Quote |
Chart |
News |
PowerRating) 1.1%.
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 to 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.Â
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 href=”/.site/stocks/education/strategies/05262000-6129.cfm”>Moving
Average Crossovers. I also recommend newcomers read my tutorial, href=”/.site/stocks/education/strategies/06272000-6815.cfm”>Trading
HOLDRs: Unique Opportunity And Risk.