The Best ETFs to Buy Now
The market is lining up to provide some seasonally strong performance, but investors should always be on the lookout for the sectors and stocks that will outperform even a strong market. With that in mind, I presented some of our proprietary data on exchange-traded funds (ETFs) that are set to outperform the market on CNBC Friday afternoon.
Our Component Breadth Index tracks the technical trends of the component companies to determine the technical breadth of each ETF. For example, in the case of the S&P 500, this indicator measures the technical strength pattern of each of the 500 companies in the index, and then compiles the results into a single number that tells the percentage of those 500 companies that are in a positive uptrend. Higher CBI readings indicate that an ETF is being driven by strong technical trends by a large number of its component companies, thus predicting a better-than-average performance in the short term.
So, which ETFs should you be considering now? Here are three that we favor for a strong year-end performance.
SPDR S&P Retail ETF (XRT)
Nov. 18: 83%
Nov. 11: 83%
Nov. 4: 83%
We’ve been hot on the retailers. Our Winning Edge subscribers have seen many retail-based trades over the last few weeks, and there’s good reason. The current CBI readings for the SPDR S&P Retail ETF (NYSE: XRT) remain strong, despite the fact that the market has seen a pullback over the past three weeks.
Historically, the retailers display a show of strength over the holiday season, but this year, things are lined up even better for the group. Not only are the retail stocks in a firm uptrend, but expectations for the holiday shopping season have been extremely low, meaning that the ability for these retailers to surpass the market’s expectations is easier.
iShares Dow Jones Transportation Average Index Fund (IYT)
Nov. 18: 90%
Nov. 11: 90%
Nov. 4: 95%
Another train that’s leaving the station, pun intended, is the transportation sector. We’ve been bullish on this group due to the fact that many of the shippers and transportation companies are seeing increases in their work.
The expectations have been low toward these companies, and the technicals are growing stronger, a powerful mix that will get stronger as the market moves forward. Make sure that you’re “on board” for this continued rally with iShares Dow Jones Transportation Average Index Fund (NYSE: IYT).
SPDR Energy Select Sector Fund (XLE)
Nov. 18: 97%
Nov. 11: 95%
Nov. 4: 97%
It’s not as sexy as transports or retail, but the energy sector is postured to keep outperforming the market over the next three months. Ninety-five percent of the companies in this sector are lockstep in a positive technical trend.
An added bonus here is the dividend yield that the SPDR Energy Select Sector Fund (NYSE: XLE) offers, which makes things more attractive for a growing number of market participants.