The streak is over, but is the trend intact?
A six-week string of gains in the S&P 500 .SPX ended on Friday amid shifting expectations for central bank stimulus. This week could bring clarity on that issue, and that could determine whether the recent rally that took the index to four-year highs will persist.
"The streak is broken, but the trend isn't, and I think the next major move on the S&P will push us up towards 1,450 or 1,500," said Mark Arbeter, chief technical strategist for Standard & Poor's in New York. "Small- and mid-cap stocks are near their all-time highs, and if they break those highs, I think that will prompt the market to really rip higher."
Still, the market could be in for a bumpy ride this week ahead of Friday's meeting of central bankers in Jackson Hole, Wyoming. Investors are looking for clues on whether Federal Reserve Chairman Ben Bernanke will announce a third round of quantitative easing.
The S&P 500 fell 0.5 percent last week, a relatively mild decline after six weeks of gains. On Tuesday, it surged to its highest level since June 2008 before pulling back. The Dow Jones industrial average .DJI slid 0.9 percent for the week, while the Nasdaq .IXIC slipped 0.2 percent.
For the year, all three major U.S. stock indexes have racked up substantial gains. The Dow has gained 7.70 percent for 2012 so far, while the S&P 500 had advanced 12.21 percent and the Nasdaq has climbed 17.84 percent. (commentary & photo courtesy of Reuters)
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This week RSI picked the following ETFs:
- iShares S&P 500 Value Index (IVE)
- iShares Cohen & Steers Realty Majors (ICF)
- SPDR S&P International Dividend (DWX)
- Market Vectors Junior Gold Miners ETF (GDXJ)
Let’s look at the details. IVE has been performing in this recent market rally and has the strength to perform well in the coming months. It pays a 2.23% yield. Remember, in the long run value outperforms growth.
ICF reflects the new strength in the real estate market. It pays a 2.76% yield. It has a great money flow trajectory that shows strong investor interest. This should be another good long-term holding.
DWX is a gamble with its exposure to the international difficulties. It yields a high 7.7% yield which reflects its risky holdings. Although it has consistently underperformed the US market, it just might be coming back (see the blue highlighted line below). The money flow looks strong as the money flows back into the sector. Therein lies the risk as DWX has been in a downtrend for well over a year. We shall see.
And speaking about gamble, GDXJ is an ETF investing in Junior Gold Miners. It has shown recent investor interest, but has its slide stopped? Maybe, but it is a risky proposition. It yields a respectable 6.6% rate but don’t count on it in the future. As I said, it is still a gamble.
Catch you next week.
