ETF Periscope: Bulls Roar Could Turn Hoarse in the Coming Weeks

"If you simply try to tell the truth you will, nine times out of ten, be original without ever having noticed it." -- C.S. Lewis

Another week, another victory lap for the Bulls.

Anyone notice a pattern here? Technically speaking, at least, that pattern is a solid uptrend, with nary an imminent level of resistance close to the horizon.

The market continued its ascent into record-high territory, with all three of the major indices notching yet another set of weekly gains. Specifically, last week’s action saw the Dow Jones Industrial Average (DJIA) gaining 1%, the S&P 500 Index (SPX) rising 1.2%, and the Nasdaq Composite Index (COMP) notching a 1.7% rise.

So is anything standing in the way of the Dow adding another 6% or so and sending it up to the 16,000 mark in the near future? Or for that matter, is anything keeping the SPX from hitting 1,700 within the next several months?

Well, yes.

Aside from the myriad of macroeconomic issues that have recently simmered but not burned, such as China, Syria, and the Eurozone, the barrier to such a relatively unencumbered ascent just might be found directly on Main Street, as seen in the form of the upcoming retail and sentiment numbers that will be released over the course of the coming week.

First up will be Monday’s retail data, courtesy of the U.S. Commerce Department. Then on Friday, Thomson Reuters/University of Michigan consumer sentiment survey will offer a view of the economy from the public’s eye. Sandwiched in between and doled out throughout the week will be a series of earnings reports from the retail sector, including Walmart (WMT) and Macy’s (M).

For much of the last three weeks, the Q1 corporate earnings numbers over this time period have been similar to the overall earnings season, just good enough to support the uptrend that has been in effect so far this year. The same generally may be said regarding the economic data reported over this same period, such as from the housing sector and the jobs numbers. Taken together with the fact that Wall Street has quickly shaken off the shock of the atrocity in Boston on April 15, investors seem to have found no compelling reason to pull money from out of equities in a major way.

So will this week’s retail data reveal a counter-trend to the Bull market? It is possible, particularly as corporate health, as seen in the Q1 numbers, could prove to have a decreasing level of correlation to the overall state of the nation’s economic recovery, at least in the short-term. 

Simply put, Wall Street’s current health may not be an accurate reflection of that of the majority of U.S. consumers.

Bottom line: The retail numbers could end up serving as an indicator that the current market uptrend is showing serious signs of wear and tear, which might be just enough to stir the Bears right out of an extended round of slumber.

What the Periscope Sees

The Sabrient SectorCast ETF Rankings rate each of the ten U.S. industrial sector iShares (ETFs) by Sabrient’s proprietary Outlook Score and are revised on a weekly basis. This week, the Financial Sector is at the top of the rankings, followed by Consumer Goods, Technology, and Health Care.

Here is the current list of some of the top performing Financial Sector ETFs year-to-date, as of the first week of May:

KIE -- SPDR KBW Insurance ETF, +23.16%

FXO -- First Trust Financial AlphaDEX Fund, +20.04%

IYF -- iShares Dow Jones US Financial Sector Index Fund, +17.61%

XLF -- SPDR Financial Select Sector Fund, +17.45%

VFH -- Vanguard Financials Index Fund, +17.36%

PSP -- PowerShares Global Listed Private Equity Portfolio, +16.11%

ETF Periscope

Full disclosure:  The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.

ETF Periscope