Tech, Financial Funds Slide
Another wave of selling took down the
tradable tech, industrial and financial funds, sending the Semiconductor HOLDR
to its lowestlevels since it began trading. Money flowed into the defensive drug and
consumer staples stocks, lifting tradable funds in those sectors.
The Pharmaceutical HOLDR
(
PPH |
Quote |
Chart |
News |
PowerRating)
rose 3%, the day’s biggest gain among the exchange-traded
funds. The Consumer Staples SPDR
(
XLP |
Quote |
Chart |
News |
PowerRating) gained 1.4%.
The Energy SPDR
(
XLE |
Quote |
Chart |
News |
PowerRating)
tacked on 2.2%. Oil futures surged as concerns rose that an escalation of
Israeli-Palestinian confrontation could draw a reaction from Arab countries reminiscent
of the 1973-74 oil boycott. For more on the action in energy futures, check out
TradingMarkets’ Futures
Market Recap.
On the downside, the Semiconductor
HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating) dropped 9.3% and moved into new low territory. The Internet
Infrastructure HOLDR
(
IIH |
Quote |
Chart |
News |
PowerRating) shed 9.4%, the sharpest decline among the ETFs.
The B2B HOLDR
(
BHH |
Quote |
Chart |
News |
PowerRating) lost 6.7%, the Nasdaq 100 Tracking Stock
(
QQQ |
Quote |
Chart |
News |
PowerRating) 5.6%,
the Dow Jones Technology iShares 5.2%. The Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating) tried to
rally but ended the session with a 1.5% loss.
Traders should be wary of a probable
fourth-quarter bounce in tech stocks, according to Bryan Brown, principal of
Spectrum Equity Services, a Beverly Hills, Calif.-based institutional advisor.
On March 13, Brown warned semis were showing a “variation on the climax run
theme,” a day before semis topped on the Philadelphia Semiconductor Index.
The day of the top, he called for the index to fall to 700. It closed at 706.5
on Tuesday.
Brown warns not to
“mistake a fourth-quarter rally for the beginning of a new bull cycle. The cyclical issues have not resolved themselves. Aggressive fourth-quarter rallies should be used to reduce exposure to this sector. Once we get a market bottom, which we don’t
have yet, the short-term potential of higher beta stocks is above average. There is a tradable bounce pending. If people want to buy these stocks, they
should by them with the notion that they should date them and not marry them.”
Financials fell as
shareholders dumped Morgan Stanley Dean Witter
(
MWD |
Quote |
Chart |
News |
PowerRating) because of continuing
rumors the firm has lost money trading junk bonds. The Banking HOLDR
(
RKH |
Quote |
Chart |
News |
PowerRating)
declined 3.9%, the Financial SPDR
(
XLF |
Quote |
Chart |
News |
PowerRating) 2.9%. the Dow Jones Financial
iShares
(
IYF |
Quote |
Chart |
News |
PowerRating) 2.6%. The heavy volume, combined with a close near the low of
an expanded trading range, raises the odds of more downside in the Financial
SPDR.
Among the broad ETFs, the Diamonds
(
DIA |
Quote |
Chart |
News |
PowerRating),
which track the Dow Jones industrial average, subtracted 0.9%.
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
Average Crossovers. I also recommend newcomers read my tutorial,
HOLDRs: Unique Opportunity And Risk.