Today in the market, Tuesday June 30, 2008: The market ended flat after spending most of the day in positive territory. The news that drives the market just wasn’t compelling enough to move stocks beyond neutral.
RSI’s Themes: No picks today! However there are some falling knifes. Please see methodology note below. RSI shows a bias towards pointing out healthcare and Pharma funds may be poised to stop their fall and bounce back. Remember, falling knife candidates are not recommended.
Catch a Falling Knife:
- ADRU – BLDRS Europe 100 ADR Index Fund
- FDV – First Trust DB Strategic Value Index Fund
- PPH – Pharm Holders
- PRFH – PowerShares FTSI RAFI Healthcare Sector Portfolio
- XLV – Health Care Select Sector SPDR
Methodology Note:
For the past several weeks I have done studies on the feasibility of utilizing ETFs with relatively low volume. To my surprise I discovered low volume ETFs did not exhibit large bid/ask spreads. I believe this due to the fact that ETFs are a bunch of stocks that individually trade at larger individual volumes. If the spread grew too much, this anomaly would be arbitraged away. A good example is PRFH mentioned above. It traded for 800 shares today and yet its bid/ask spread was nicely low, unlike stocks that trade on low volume. Its top ten holdings are the cream of the Healthcare Sector. Consequently, I have modified RSI to allow the selection of lower volume ETF/CEFs. Please use caution in any placement of trades.
