div xmlns=”http://www.w3.org/1999/xhtml”pDespite continuing skepticism, the market continues to move higher during what many argued was the season of danger.#0160; Those following quot;calendar rulesquot; advised investors to sell in May, to sell in September, and to sell in October.#0160; In a couple of weeks we will be out of the danger period.#0160; It will be interesting to see if the calendar adherents stick to their method.#0160; If they do, we should see fresh buy recommendations from some unlikely sources./ppHere at quot;A Dashquot; our indicators are only mildly bullish, but there are specific sectors worth consideration.#0160; Emerging market ETF#39;s make up most of the portfolio, but there are also other choices./ppstrongOur Approach/strong/ppWe let the system be our guide.#0160;#0160;/ppWe
study sectors continually, looking at the charts and ratings for
hundreds of ETF#39;s.#0160; Each week we provide a list of our top-rated
sectors for the next three weeks, along with some of our current
observations.#0160; ETF investors can check out the list and compare our
findings with their own conclusions./ppIn our analysis, we consider Trends, Cycles, and a bit of Anticipation.#0160; Since we apply
the model to nearly 300 ETF#39;s, we call it the TCA-ETF system.#0160; (For new
readers, there is a more complete description of our methods at the end
of the article.#0160; We also have a free report with more detail on the system and results, available on request.)/ppstrongThe Macro View/strong/ppFrom an overall market
viewpoint, our indicators continue in positive territory, although it is a close call.#0160; The key elements are as follows:/pul
liWe now find 94% of our ETF#39;s in positive territory (95% last
week).#0160; The emstrongmedian strength /strong/emrating
for the overall list is 25.#0160; We are changing from mean to median
strength in our weekly reports, because the median is a more helpful
and robust measure.#0160; (A score of quot;0quot; implies the average long-term ETF
expectancy.)/li
li75% (down from 95%) of our sectors are in the quot;penalty box.quot;#0160; This means that they
are currently disqualified from the buy list for technical reasons.#0160;
You can think of this as a sophisticated quot;stop lossquot; rule, often
applied in advance./li
liOur index package remains slightly positive.#0160; For this rating we look at the
ETF#39;s
(both long and short)#0160; for the Samp;P 500, the Dow, and the Nasdaq.#0160;
You can see these ratings is the results table for this week./li
/ul
pstrongFocus on Banks — Comparing the Choices/strong/pp/pp/pp/pp/pp/pp/pp/pp/pp/ppThere are many financial ETF#39;s, but let us take three as the focus for this week./ppspan style=”font-size: 13px;”a href=”https://www.spdrs.com/product/fund.seam?ticker=KRE” target=”_blank”SPDR KBW Regional Banking ETF (KRE)#0160; /ahas a roughly equal weighting of many banks.#0160; The P/E ratio is about 22 and the price-to-book is .76.#0160; Yield is about 4.5%.#0160; Here is the chart./span/ppbr /span style=”font-size: 13px;”/span/ppspan style=”font-size: 13px;”a href=”http://oldprof.typepad.com/.a/6a00d83451ddb269e20120a64a7595970c-popup” onclick=”window.open( this.href, #39;_blank#39;, #39;width=640,height=480,scrollbars=no,resizable=no,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0#39; ); return false” style=”display: inline;”img alt=”Kre” class=”asset asset-image at-xid-6a00d83451ddb269e20120a64a7595970c ” src=”http://oldprof.typepad.com/.a/6a00d83451ddb269e20120a64a7595970c-450wi” style=”width: 450px;” //a#0160;/span/ppa href=”https://www.spdrs.com/product/fund.seam?ticker=kbe” target=”_blank”SPDR KBW Bank ETF (KBE)/a#0160; emphasizes larger banks with the top ten constituting 60% of the fund.#0160; The yield is much lower at 2.1%, while the other ratios are similar to KRE.#0160; Here is the chart./ppa href=”http://oldprof.typepad.com/.a/6a00d83451ddb269e20120a5f35c54970b-popup” onclick=”window.open( this.href, #39;_blank#39;, #39;width=640,height=480,scrollbars=no,resizable=no,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0#39; ); return false” style=”display: inline;”img alt=”Kbe” class=”asset asset-image at-xid-6a00d83451ddb269e20120a5f35c54970b ” src=”http://oldprof.typepad.com/.a/6a00d83451ddb269e20120a5f35c54970b-450wi” style=”width: 450px;” //a br / /pa href=”http://us.ishares.com/product_info/fund/overview/IAT.htm?qt=IAT” target=”_blank”Dow Jones U.S. Regional Banks Index Fund

/aa
(IAT)/apspan style=”font-size: 13px;”#0160;#0160; emphasizes regional banks, differing from KRE, but has more emphasis on capitalization.#0160; The top ten make up 60% of the fund.#0160; Yield is only 1.4%, P/E is about 25, and price-to-book is 1.25.#0160; Here is the chart./span/ppspan style=”font-size: 13px;”a href=”http://oldprof.typepad.com/.a/6a00d83451ddb269e20120a64a7cae970c-popup” onclick=”window.open( this.href, #39;_blank#39;, #39;width=640,height=480,scrollbars=no,resizable=no,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0#39; ); return false” style=”display: inline;”img alt=”Iat” class=”asset asset-image at-xid-6a00d83451ddb269e20120a64a7cae970c ” src=”http://oldprof.typepad.com/.a/6a00d83451ddb269e20120a64a7cae970c-450wi” style=”width: 450px;” //a br / /span/ppbr /span style=”font-size: 13px;”/span/ppstrongspan style=”font-size: 13px;”Making a Choice/span/strong/ppspan style=”font-size: 13px;”While all three choices are banking ETF#39;s, there are obviously some major differences.#0160; The pundits take quite different perspectives./span/ppspan style=”font-size: 13px;”a href=”http://www.ritholtz.com/blog/2009/10/oh-those-financials/” target=”_blank”David Kotok, writing at The Big Picture/a compares two of our focus ETF#39;s as well as some others.#0160; His recommendation is for KCE, not really a bank group, so readers should check out the entire article.#0160; Here is his comment on KBE versus KRE:/span/ppspan style=”font-size: 13px;” /span/pp/pp/pp/pblockquotepContrast KBE with KRE. It is the exchange-traded fund composed of
regional banks that have not been deemed “too big to fail” by the
Washington-based troika of Treasury, Fed, and White House/Congress.
Many regional banks are small enough to be resolved by the FDIC, and
many suffer from a greater concentration of deteriorating commercial
loans than their larger brethren. Their status is reflected in the
performance of their stocks. KRE has had a total return of only 49%
since March 9. It has actually lagged the performance of the Samp;P
500 index, represented by the “Spider.” SPY has had a total return
since March 9 of 59%./p/blockquotepMichael Johnston at ETF Database a href=”http://seekingalpha.com/article/165646-regional-bank-etfs-showing-signs-of-life” target=”_blank”hits the highlights/a in the comparison between IAT and KRE:/pblockquotepThe most significant difference between IAT and KRE is the weighting
methodologies employed by the underlying indexes. IAT tracks the Dow
Jones U.S. Select Regional Banks Index, a market
capitalization-weighted benchmark. KRE tracks the KBW Regional Banking
Index, an equal-weighted benchmark. As such, a handful of companies
make up a significant portion of IAT’s holdings, while KRE is more
diversified across more than 50 different regional banks and thrifts.
IAT’s largest holding, US Bancorp, makes up almost 17% of its holdings,
while KRE’s largest individual holding is less than 3% of assets./ppKRE
also has a much lower price/book ratio than IAT. Price-to-book is an
important metric in valuing banks, particularly in an environment where
many asset bases have been eroded by writedowns of mortgages and
commercial property loans./p/blockquotepOur own choice is KRE.#0160; The model is very sensitive to risk and reward, and looks ahead three weeks.#0160; Both of the other choices are currently in our penalty box.#0160; Investors with other objectives and time frames might well reach different conclusions./pp/p p/pp/ppstrongspan style=”font-size: 12pt; font-family: #39;Times New Roman#39;,#39;serif#39;;”Weekly TCA-ETF Rankings/span/strongspan style=”font-size: 12pt; font-family: #39;Times New Roman#39;,#39;serif#39;;” o:p/o:p/span
/ppspan style=”font-size: 12pt; font-family: #39;Times New Roman#39;,#39;serif#39;;”We
had
a small gain last week, about one percent behind the Samp;P 500.#0160; Our current
holdings are not near the top in strength rank, but they still have
good ratings.#0160; Our testing has shown what Vince calls quot;robustquot;
results for anything with a positive strength rating.#0160; We do
not buy ETF#39;s in the penalty box or those with poor liquidity.#0160; We
provide these ratings as information for readers who may not trade as
frequently as we do.#0160; Those signing up for our free weekly email update
can also get the entire list./span/pp[We also note that three weeks ago we
implemented what our modeling guru, Vince Castelli, calls an improved
filter.#0160; While the underlying model has not changed, the inputs used
reflect our best efforts to improve the signal-to-noise ratio.#0160; We have
advanced the timing (the Anticipation factor) reflecting the recent
quot;hot moneyquot; tendencies in ETF#39;s.#0160; This means earlier recognition and
also faster moves to the penalty box.#0160; Those tracking our entire data series should keep this in mind.]/p
pspan style=”font-size: 12pt; font-family: #39;Times New Roman#39;,#39;serif#39;;”As
noted above, all of the macro market indicators remain positive,
although most ETF#39;s are in the penalty box.#0160; Based upon the current /spanspan style=”font-size: 12pt; font-family: #39;Times New Roman#39;,#39;serif#39;;”model signals, we have maintained (by a whisker) our bullish position in the a href=”http://tickersense.typepad.com/ticker_sense/” target=”_blank”span style=”color: blue;”Ticker Sense Blogger Sentiment poll/span/a./span/p
pspan style=”font-size: 12pt; font-family: #39;Times New Roman#39;,#39;serif#39;;”Here
are
the top sectors from our expanded universe of 280 ETF#39;s.#0160; The list
also includes the values for the broad market ETF#39;s and their
inverses./span/pp/pp/ppa href=”http://oldprof.typepad.com/.a/6a00d83451ddb269e20120a5f31e19970b-popup” onclick=”window.open( this.href, #39;_blank#39;, #39;width=640,height=480,scrollbars=no,resizable=no,toolbar=no,directories=no,location=no,menubar=no,status=no,left=0,top=0#39; ); return false” style=”display: inline;”img alt=”101609″ class=”asset asset-image at-xid-6a00d83451ddb269e20120a5f31e19970b ” src=”http://oldprof.typepad.com/.a/6a00d83451ddb269e20120a5f31e19970b-450wi” style=”width: 450px;” //a br / /ppstrongNote for New Readers/strong/p
pOur weekly ETF Update is designed to assist both investors and
traders interested in ETF#39;s and Sector Rotation.#0160; Before turning to the
current rankings, let us undertake a review for readers new to this
series.br /br /emOur Method./em#0160; In this a href=”http://oldprof.typepad.com/a_dash_of_insight/2007/09/the-sector-upda.html” target=”_blank”past article/a,
we described our basic methodology and why we believe the rankings are
useful for fundamental traders and technical traders alike.#0160; While we
urge readers to check out the entire article, the key point is that
ETF#39;s pose challenges and opportunities different from investment in
individual stocks.#0160; The fundamentals may be more difficult to assess.#0160;
Even with a good grasp on fundamental trends, there is a lot of
technically-based trading in ETF#39;s.#0160; This means that a href=”http://oldprof.typepad.com/a_dash_of_insight/2007/09/fundamental-or-.html” target=”_blank”those trading with a fundamental approach/a (and we do this as well) want to monitor the quot;hot moneyquot; moves.#0160; Here is an a href=”http://oldprof.typepad.com/a_dash_of_insight/2007/09/fundamental-or-.html” target=”_blank”article on that point/a.br /br /emThe system synopsis/em.
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.#0160; While we do not reveal the exact methodology for spotting
trends and cycles, the system is not a quot;black box.quot;#0160; The basic elements
are used by many, and widely reported.#0160; We even discuss the a href=”http://oldprof.typepad.com/a_dash_of_insight/2007/12/trading-systems.html” target=”_blank”need for human analysis/a as opposed to black box trading.br /br /emWe report the rankings/em
each week, now on the weekend with a one-day delay, using the Thursday
output from the model.#0160; 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./pp br /span class=”fund_ticker”/span/ppspan class=”fund_ticker”br /

/span/p/div

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Last 5 posts by Jeffrey Miller

• A Tough Nut to Crack - October 29th, 2009
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• Evaluating Predictions - October 5th, 2009