Utilities ETF Is Sending Signals

November 03, 2008 at 3:00 pm by Tom Lydon

Utilities ETF It’s been tough going for stock exchange traded funds (ETFs) lately

Among other things, fear and greed tend to influence the markets more than anything and right now nobody knows if the “Big Money” is done selling into market strength, says Gary Gordon for ETF Expert. But we’re moving forward, and we’re aware that the volatility that’s been seen in recent weeks and months can’t continue forever.

Seeing that, Gordon set out to look at a variety of criteria that would make one ETF more attractive than others. He found that the SPDR Select Utilities Fund (XLU) fit the bill:

Beta 20% lower than the market at large
Dividend yield nearly twice that of most other sectors
Earnings yield twice that of a 10-year note

XLU presents a beta of .77,a dividend at 4%, and a yield that is 8% higher than a 10-year note. Of course, stocks will have to go higher for more progression, and the asset class needs to as well.

XLU is 7.6% below its 50-day moving average. When the market recovers, we suggest having an entry strategy. We’ll be using the 50-day moving average. When a fund crosses this point, we’ll enter incrementally until we’re in sight of the 200-day moving average. We explain this in more detail here.

Utility Exchange Traded Funds (ETFs)