Looking at market sectors is a great way to get overall perspective. When sector breadth shrinks, as it has over the last few weeks, it is a warning. Our weekly ETF update takes a time frame of about one month. We are especially interested in being on the right side of big moves. So should you!

Those with different time frames may reach wildly different conclusions. Those investing in bank stocks, for example, include both those who are looking a year ahead and those thinking one week ahead.

Successful investing means knowing your time frame and your mission.

Our rankings resemble the TV reality show, Survivor. The story is mostly about what is wrong. Secondarily one may ask, “Is there anything left to buy?”

This week’s featured sector reflects the circumstances.

The Featured Sector: Environmental Services

Market Vectors Environmental Services ETF (EVX) is a mostly about waste disposal. The top holding out of the 21 constituent companies is a little over 10% and the top four make up about 40% of the Amex Environmental Services Index. There is some diversification, since the group includes both industrial and consumer waste disposal, as well as companies with other environmental services.

There has not been much commentary on EVX. In our review of favorite sources we see only this comment from Gary Gordon.

The chart shows the performance over the last year or so, along
with the buy and sell calls from our TCA model. While we have had a
“buy” rating since mid-April, there have been some recent losses.

The sector performance is not at the outstanding level that we hope to buy. It is more like a survivor.

It raises an interesting question for active traders. If you owned this ETF, would you have stopped out on the recent decline? What criterion would you use for re-entering?

Our own answers come form our TCA-ETF system.

Weekly TCA-ETF Rankings

It was a brutal week in the market, particularly if you measure (as we do) from Thursday to Thursday. That includes last weeks down 400 day and excludes last Friday’s rally.

Only six ETF’s still qualify for a “buy.” The rest are in what we call the penalty box. If we were to include both the long and short ETF’s for the Dow, the S&P 500, and the NASDAQ, two of the three shorts would be in our rankings We are considering including these ETF’s in future articles. Meanwhile, here are the survivors — the top six in the rankings.

Note for New Readers

Our weekly ETF Update is designed to assist both investors and traders
interested in ETF’s and Sector Rotation. Before turning to the current
rankings, let us undertake a review for readers new to this series.

Our Method. In this past article,
we described our basic methodology and why we believe the rankings are
useful for fundamental traders and technical traders alike. While we
urge readers to check out the entire article, the key point is that
ETF’s pose challenges and opportunities different from investment in
individual stocks. The fundamentals may be more difficult to assess.
Even with a good grasp on fundamental trends, there is a lot of
technically-based trading in ETF’s. This means that those trading with a fundamental approach (and we do this as well) want to monitor the “hot money” moves. Here is an article on that point.

The system synopsis.
We look at Trending sectors, Cyclical Sectors, and build in an element
of Anticipation for both entry and exit — thus the name of the model,
TCA-ETF. While we do not reveal the exact methodology for spotting
trends and cycles, the system is not a “black box.” The basic elements
are used by many, and widely reported. We even discuss the need for human analysis as opposed to black box trading.

We report the rankings
each week, now on the weekend with a one-day delay, using the Thursday
output from the model. We monitor and trade this daily, and offer a
free report (request via the email address on the top left of the site)
for those interested in our weekly trading program.

Last 5 posts by Jeffrey Miller

• A Tough Nut to Crack - October 29th, 2009
• ETF Update: Looking to the Internet - October 25th, 2009
• Healthcare Reform Becoming Less Likely - October 21st, 2009
• ETF Update: Another Look at the Banks - October 18th, 2009
• Identifying Quackery (and Other Mistakes) - October 6th, 2009