Published July 22, 2013
The S&P 500 closed out last week at the best level ever as it upped its winning streak to four weeks. More buying this week could push the index above the psychological 1700 level for the first time ever.
As the indices are hitting highs, so are a number of ETFs that invest in a plethora of different asset classes. The key to investing in a market that is hitting highs is to ride the momentum. However, this does not suggest investors throw darts at the wheel of investment choices. Not all ETFs hitting highs are created equal.
A large portion of the MarkETForce ETF WatchList are amongst the group of ETFs hitting highs and three in particular falling into the category of highly intriguing. The three ETFs are highlighted below.
The Market Vectors Unconventional Oil and Gas ETF (FRAK) is a basket of energy stocks that are involved in the fracking process of extracting natural gas and oil from shale as well as a variety of other unconventional techniques.
The majority of the stocks that make up the ETF are large-cap names that not only use the less popular techniques, but also the traditional extracting methods. The combination of the expansion of the unconventional techniques and oil prices at yearly highs bodes well for the ETF. Investors should watch support at the $26.50 area on a pullback.
The low-cost approach to investing in the large-cap industrial names has been under the radar for many investors, however the outlook remains positive. Even with a moderate global growth story, the sector has been able to perform well. The strength in the U.S. industrial sector has been a boost to the sector that under-appreciated. If the ETF can pull back from the high to the $85 area, it will become very tempting.
The First Trust NASDAQ Global Auto ETF (CARZ) is another ETF that is under-appreciated and can even be considered unloved. Since the bailout of the auto industry a few years ago and now with the news of Detroit filing for bankruptcy, investors have been shying away from auto stocks.
That is unfortunate, as CARZ is up 27 percent in 2013 and trading at a new high. The basket of the big name auto companies around the globe (20 percent in the U.S. and 36 percent in Japan) gives investors diversification within a niche sector. The long-term story revolves around the average age of a light vehicle on the road in the U.S. being greater than 11 years. This is an all-time high and suggests new car purchases are inevitable in the coming years. CARZ looks attractive at the $36 area.
When the market or individual ETFs are hitting new highs the best way to play the breakouts are to be patient. No stocks go up every day and therefore looking for a pullback from highs will offer a better entry point for the long-term investor.
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