SET Portfolio Update May 2013

May 7, 2013

Dear Sector ETF Trader Reader,

There’s no doubt about it – The S&P 500 is on a roll.

The large cap index is up 14% year-to-date and it’s hitting fresh all-time highs again this week.  And if you include dividends, the S&P 500 has been up 10 out of the last 11 months!

Amazingly, the bull market that began back in March 2009 is now 50 months old.

How much longer will the current bull last?

The average bull market has lasted 57 months.  But there’s reason to believe this one will last longer than normal.

Why?

In a word, the Fed.

The Fed’s bond buying program, QE3, isn’t expected to pull back from the current pace until well into 2014.  In fact, if economic winds change, they might even increase the amount of bond buying!

That’s a strong floor of support under stock prices.

In other words, the Fed is willing to do whatever it takes to push, pull, prod, or drag the economy and the stock market higher.  And that’s good news for our ETFs!

Now onto the updates…

. . . . Morgan Stanly Cushing MLP High Income Index ETN (MLPY) – Buy up to $18.50

MLPY has settled into a range between $17.75 and $18.50.  This high yielding ETF may hold at these levels for a short time.  But the combination of growth from the resurgence of the American energy industry and investors search for yield should continue to fuel more upside in MLPY is the weeks ahead.  Grab your shares up to $18.50.

. . . . SPDR S&P Oil & Gas Equipment & Services ETF (XES) – Hold

XES jumped out of the gates with a 7% rally over the last few weeks.  In fact, XES blew right by our $38.50 buy up to price and it’s currently trading for $39.81.  The surge higher pushed oil services ETF above resistance of the short term downtrend.  This is a good sign that cyclical sectors are building bullish momentum.  Continue holding XES for bigger gains.

. . . . Market Vectors Agribusiness ETF (MOO) – Sell

MOO was hit by some massive volatility over the last month.  Needless to say, it took many investors, including me, by surprise.  And as Walter R. pointed out to me in a recent e-mail, MOO closed below our $52 stop loss.  That’s our cue to sell… Keep in mind, we don’t issue a sell alerts when one of our stops or price targets are hit.  However, from time to time, we will issue a special sell alert if we need to get out of a position in between updates or the monthly issue.

. . . . iShares Semiconductor ETF (SOXX) – Hold

SOXX pulled back right to the neck line of the head-and-shoulders chart pattern.  But it held right at this key support level and has soared 10% from $56 to $61.52 over the last few weeks.  In fact, I’m moving SOXX to a hold because it’s now above our $60.25 buy up to price.

. . . . iShares US Industrials ETF (IYJ) – Hold

IYJ just broke out to a new high this week.  Make no mistake, IYJ’s breakout is a big deal. We could finally be seeing the market leadership shift from defensive to cyclical stocks. IYJ is currently trading for $82.59.  It’s moved beyond out $81.00 buy up to price so we’re moving it to a hold.

. . . . iShares DJ US Home Construction Index Fund (ITB) – Hold

ITB has regained its bullish momentum.  Over the last few weeks, our home builder ETF has jumped 14% from $22 to $25.14.  With housing pricing on the rise, limited supply, and low interest rates, the homebuilder industry should continue to roll.  Continue holding ITB for further gains.

. . . . SPDR S&P Bank ETF (KBE) – Hold

KBE is regaining its bullish momentum after treading water for the last few months.  It’s not complicated… a strong housing market and a stock market that’s at all-time highs is good for financials.  What’s more, banks have adapted to the new regulations and being allowed to increase dividends and buy back outstanding shares to boost earnings per share.  Continue holding KBE for bigger gains.

. . . . Guggenheim Timber ETF (CUT) – Hold

CUT is benefiting from an increase in demand for lumber.  And as the pace of new home construction accelerates this year, the price for 2X4s will continue to go up and up.  And prices should continue moving higher throughout the year.  It’s simply been a slow road to bring sawmills that were closed during the recession back online.  Without new sources of supply lumber, prices and CUT should continue moving higher in the weeks ahead… continue holding.  Our price target is $25.50.

. . . . First Trust Internet Index Fund (FDN) – Hold

FDN hit a new all-time high of $44.57 on Friday.  We’re now up 16%.  The breakout above the recent highs is a clear indication of bullish momentum.  I’m expecting this rally to continue in the weeks ahead.  Continue holding FDN for bigger gains.

. . . . iShares Dow Jones US Basic Materials (IYM) – Hold

IYM is another cyclical ETF that’s showing some signs of life.  In fact, the recent 7% rally from $66 to $70.56 since mid-April has pushed IYM beyond our $70.00 buy up to price. Continue holding…

Action To Take

• MOO triggered stop loss at $52 on 4/15/13.

 

Category: SET Portfolio Updates