Small-Cap and Consumer ETFs Reasserting Themselves

ETF Trends

ETFs tracking economically-sensitive sectors such as consumer discretionary and small-cap companies are trying to lead the market, which is a bullish technical sign.

In U.S. small-caps, the iShares Russell 2000 (IWM) has found support at the 50-day moving average, just as it did in April and then June, says Investors Intelligence technical analyst Tarquin Coe.

“Further bullish evidence is evident from the relative chart. The four month uptrend for the small-caps versus the large-caps still stands and is presently attempting to reassert,” he said in a newsletter.

Consumer Discretionary Select Sector SPDR (XLY) is also finding support at a key trendline. The consumer discretionary sector has posted market-beating performance since the since stocks bottomed in March 2009 during the financial crisis.

For example, XLY has a three-year annualized return of 28.1%, compared with 16.8% for the S&P 500, according to Morningstar. [Baby Boomers, Economy Drive Top-Performing Sectors]

“One area with strong rally potential is the consumer discretionary field,” Coe notes.

The price chart for XLY is starting to bounce from lower support of the 2013 rising channel, while the momentum indicator is turning up from a similar level as the reassertion off the late June low, he said.

“The relative chart is well positioned for a break to record highs, fully expected given the favorable momentum condition,” Coe added.

iShares Russell 2000

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small-cap-etf

Consumer Discretionary Select Sector SPDR

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Full disclosure: Tom Lydon’s clients own IWM.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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