ETF Update: Chip Stocks on the Move

Our ETF rankings provide several interesting insights this week.

  • Weak dollar plays still predominate;
  • The overall market looks healthier; and
  • There are some surprising new entries to our "top eight."

We'll talk about the featured sector first, and catch up with other conclusions in our weekly trading review.


Each week we look at a universe of 57 ETF's with special attention to the Trending and Cyclical behavior of the sector.  We also add a touch of Anticipation, so we call it our TCA-ETF model.  The rankings help us see broad sector trends, as well as providing a useful perspective on the overall market.  (The complete current rankings are at the end of the article, along with an explanation of our methodology).

Featured Sector:  Semiconductor Stocks

In our universe we use the iShares S&P North American Technology-Semiconductors Index Fund

(IGW) to represent the chip stocks.  One reason we like this alternative is that there is only 36% concentration in the top five holdings.  As one would expect for a tech sector, the P/E ratio is nearly 25 and the beta about 1.25.

We understand that the P/E will seem high to many readers.  It is important to remember that at economic troughs, cyclical stocks often have a high P/E.  The real question is whether this is the trough.

IGW moved from #33 to #7 in one week.  Let us take a look at the chart.


We never know exactly what the model "sees", but looking at hundreds of charts is like an education.  There is potential for the low 40's, it would seem.

Other Comments on Chip Stocks

Each week we survey the other ETF experts to compare our opinions.   Most have been pretty slow to pick up on chip sector.

Tom Lydon takes a look at this sector as a leading indicator for the market in general.

Some share our viewpoint that the rise of IGW shows important overall breadth in the market advance.

Some see chip stocks as winners even when other sectors decline.

There is not much providing real focus on this group, but we own it.

Weekly TCA-ETF Rankings

With 46 of our
57 sectors are in the
"buy" range, we have a much-improved picture from last week.  (21 of 57)  We also have positive ratings for all of the broad market ETF'S.

We were down about 0.6% in our weak dollar plays last week, while the S&P 500 was up over 2%.  This can happen when you are seeking uncorrelated gains.  The position is a bit more diversified for the coming week.

Based upon the model signals, we moved from neutral to bullish in our position in the Ticker Sense Blogger Sentiment poll.


Note for New Readers

Our weekly ETF Update is designed to assist both investors and
traders interested in ETF's and Sector Rotation.  Before turning to the
current rankings, let us undertake a review for readers new to this

Our Method.  In this past article,
we described our basic methodology and why we believe the rankings are
useful for fundamental traders and technical traders alike.  While we
urge readers to check out the entire article, the key point is that
ETF's pose challenges and opportunities different from investment in
individual stocks.  The fundamentals may be more difficult to assess. 
Even with a good grasp on fundamental trends, there is a lot of
technically-based trading in ETF's.  This means that those trading with a fundamental approach (and we do this as well) want to monitor the "hot money" moves.  Here is an article on that point.

The system synopsis.
We look at Trending sectors, Cyclical Sectors, and build in an element
of Anticipation for both entry and exit — thus the name of the model,
TCA-ETF.  While we do not reveal the exact methodology for spotting
trends and cycles, the system is not a "black box."  The basic elements
are used by many, and widely reported.  We even discuss the need for human analysis as opposed to black box trading.

We report the rankings
each week, now on the weekend with a one-day delay, using the Thursday
output from the model.  We monitor and trade this daily, and offer a
free report (request via the email address on the top left of the site)
for those interested in our weekly trading program.

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One comment

  • Bluce November 8, 2009  

    Congrats for the nice blog post.