Market Still Yet To Break Out Of 2014 Slump

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

The S&P 500 index eked out a marginal gain today, while the Dow Jones Industrial Average dropped, weighed down by losses for Verizon Communications Inc. (VZ) and AT&T Inc. (T). Bed Bath & Beyond Inc. (BBBY) shares fell 12.5% after the retailer reported fiscal third-quarter earnings and trimmed its outlook late Wednesday. Macy’s Inc. (M) jumped 7.6% after the retailer said it would lay off 2,500 workers and close five underperforming stores. Family Dollar Stores Inc. (FDO) shares recouped sharp losses but still closed 2% lower after the discount retailer’s quarterly results missed expectations. Apple Inc. (AAPL) shares fell 1.3% after saying it will try to reach a settlement with Samsung on their long-running patent fight ahead of a new trial that is scheduled to begin in March in California.

While the overall market has yet to break out in 2014, there are a number of sector ETFs that have already hit new highs and appear to be ready to lead the first 2014 market rally. There are several health care-related ETFs (XLV) that are hitting new highs, led by a big surge in the biotech and pharmaceutical stocks. The financials, which often outperform during market rallies, have a couple of ETFs breaking out, and then there is the group of miscellaneous sectors attracting buyers.

In economic news, the number of Americans who applied to receive unemployment benefits in the first week of the New Year fell to the lowest level since the end of November. In the week ended Jan. 4, initial jobless claims fell by 15,000 to a seasonally adjusted 330,000, the U.S. Department of Labor said Thursday.

With the the sideways pattern continuing, only 2 out of our 10 ETFs in the Spotlight made new highs.

2. ETFs in the Spotlight

In case you missed the announcement and description of this section, you can read it here again.

It features 10 broadly diversified ETFs from my HighVolume list as posted every Monday. Furthermore, they are screened for the lowest MaxDD% number meaning they have been showing better resistance to temporary sell offs than all others over the past year.

In other words, none of them ever triggered their 7.5% sell stop level during this time period, which included a variety of severe market pullbacks but no move into outright bear market territory.

Here are the 10 candidates:

All of them are in “buy” mode meaning their prices are above their respective long term trend lines by the percentage indicated (%M/A).

Now let’s look at the MaxDD% column and review the ETF with the lowest drawdown as an example. As you can see, that would be XLY with the lowest MaxDD% number of -5.73%, which occurred on 11/15/2012.

The sell off in the month of June 2013 did not affect XLY at all as its “worst” MaxDD% of -5.73% still stands since the November 2012 sell off.

A quick glance at the last column showing the date of occurrences confirms that five of these ETFs had their worst drawdown in November 2012, while the other five were affected by the June 2013 swoon, however, none of them dipped below their -7.5% sell stop.

Year to date, here’s how the above candidates have fared so far: