Investors have been treated to an uncommonly strong summer run by stocks. The June-August time period is normally marked by anemic volume and declines for equities, which has not been the case in 2012. Since the start of August, the SPDR S&P 500 (SPY) has added nearly three percent while the PowerShares QQQ (QQQ) has soared 5.3 percent.
What makes the rally all the more surprising is that June, July and August sit squarely in the six months of the year that are historically unkind to stocks. Unfortunately, so does September and with the rally looking long in the tooth, speculation has grown that stocks will retreat in September.
Not to mention, there is no denying the efficacy of seasonal investing trends. Professionals pay attention to these trends for a simple reason: History repeats itself and knowing that can be profitable.
With that, here are some ETFs that merit consideration as September draws near:
Direxion Daily Semicondct Bear 3X Shares (SOXS) The seasonal weakness for semiconductor names usually starts in August, but that has not been the case this year. SOX is enduring a dreadful month at the hands of a tech-lead rally. There is a two-fold bull case for this bearish ETF. First, SOXS seems to have found support around $30. Second, the tech rally is once again more attributable to Apple (AAPL) than other sub-sectors of the tech universe and that includes chip.
Direxion Daily Energy Bear 3X Shares (ERY) ETFs such as the Energy Select Sector SPDR (XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) have been stout performers for over a month. Additionally, the long-term outlook for the energy sector is still bright.
However, ERY has some near-term allure for a few reasons. First, a loss of almost 18 percent in the past month might be a sign this triple-leveraged play is ready to notch a few winning days. Second, the possibility exists that more weak economic data will be reported, in turn making investors question the strength of oil demand.
Finally, the end of September usually marks the start of seasonal weakness for oil equities. That usually ends in early November, so ERY should be treated as a trade, not an investment.
Since June, SLX has flirted with the $45-$46 area twice only to return to support at $40. Today, largest steel ETF is trading above $45, which may sound impressive given that it breached $40 on the downside a few weeks ago. In reality, $45 is nothing to crow about for SLX because this was a $58 ETF in February.
SLX resides more than seven percent below its 200-day moving average, further proof the technicals on this fund are ailing. All that said, it's difficult to dismiss the potential for upside here, particularly if a pre-election rally commences in mid-September.
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