Are These Lagging ETFs Ready To Take Off?

The stock market took a rest on Monday, despite a 4.9% increase in existing home sales, as volatility was low, with the advance/decline ratios neutral. The preliminary Euro zone manufacturing index came in weaker than expected as France’s data dragged the zone lower. In contrast, HSBC initial reading from the purchasing managers index for China hit a seven month high as it moved back into the expansion zone.

More data today on manufacturing with the Richmond Fed Manufacturing Index, while the Durable Goods and GDP will be released Wednesday. The focus today will be on the housing market, with the S&P Case-Shiller Housing Price Index and New Home Sales out this morning.

The Conference Board will also release the June reading for Consumer Confidence, which was flat last month. This data could be important for three of the sector/industry ETFs that have been lagging the broader market all year. If the economy is going to improve further, then we should see more consumer buying and an improving level of confidence.

While the Spyder Trust (SPY) dropped into negative territory for the year in mid-April, it is now up 6.53% YTD according to Morningstar. In contrast, the Sector Select SPDR Consumer Discretionary (XLY) is down 0.69% with the SPDR S&P Retail ETF (XRT) down 1.85%. Both are up nicely from their May lows but are still below their 2014 highs.

The housing market also plays an important economic role as most of the home building stocks peaked over a year ago and most analysts are not yet convinced it is ready to rebound, as the iShares Dow Jones Home Construction ETF (ITB) is down 2.55% YTD. The relatively low level of buy recommendations for the homebuilding stocks also gives them significant upside potential (Why Following the Crowd Can Be a Bad Idea) and one individual homebuilder is also acting well technically.

http://www.forbes.com/sites/tomaspray/2014/06/24/are-these-lagging-etfs-ready-to-take-off/