Hot ETFs: Week 8

By John Nyaradi

Hot ETFs for Week 8 are in Energy, Asia and Healthcare

Week 8 of 2012 is in the record books and year to date the S&P 500 (NYSEARCA:SPY) is 6.6%.

Hot ETFs for Week 8:

iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (NYSEARCA:IEO) gained 7.4% on the week

iShares MSCI Hong Kong Index Fund (NYSEARCA:EWH) added 3.1% for Week 8

iShares MSCI Japan Index Fund (NYSEARcA:EWJ) was up 2.1%

iShares Nasdaq Biotechnology Index Fund (NYSEARCA:IBB) gained 1.7%.

Moving the view out a bit to get the “big picture,” or at least a “bigger picture,” we see the leading ETFs for the last 4 weeks:

iShares MSCI Turkey Index Fund (NYSEARCA:TUR) up 22.5% over the last 4 weeks.

iShares S&P India Nifty 50 Index Fund (NYSEARCA:INDY) added 20.3% for the previous month

iShares MSCI Austria Investable Market Index Fund (NYSEARCA:EWO) up 17%

iShares MSCI Italy Index Fund (NYSEARCA:EWI) added 14.9%

iShares MSCI Germany Index Fund (NYSEARCA:EWG) up 14.4%

While the weekly gainers are interesting to watch for potential new leaders and breakout sectors, these can fluctuate quite rapidly and exhibit great volatility. This was a big week for oil and for Asia with Bank of Japan intervention in currency markets and a much hoped for resolution to the Greek crisis and so we saw heady gains in sectors encompassing energy, Asia and health care.

Going out to the 4 week view, we see some commonality, as foreign sectors are the leaders all the way across the board. Europe was the big winner with double digit gains in Italy, Austria, Turkey and Germany, along with emerging market India, as fear of a European meltdown triggered by a Greek default seemed to wane towards week’s end.

Famed scientist, Sir Isaac Newton, said in his first law that “matter in motion tends to stay in motion until acted upon by an external force” and this premise also oftentimes holds true in investing, as hot sectors and ETFs remain hot until acted upon by an external force. This is a foundation of momentum investing and so it is instructive to see which sectors are market leaders in order to find good investment/trading opportunities and also to “look under the hood” of the broader indexes and see what’s really going on.

Bottom line: Short and medium term, strength is seen in Europe and Europe ETFs, particularly the countries at the heart of the ongoing Greek crisis. Health care remains strong, and, of course, the commodity complex in general and oil, in particular, exhibit volatility and this week’s volatility was sharply to the upside.

Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.