Market Overview

ETFs For Black Friday

Or should it be Black Thursday? Some of the largest U.S. retailers including Wal-Mart (NYSE: WMT), Target (NYSE: TGT) and properties owned by Sears Holding (NASDAQ: SHLD) will open their doors to shoppers on Thanksgiving night.

Understandably, many employees are not fussed about having to work on Thanksgiving, but some consumers will love the chance to get an early start on the good deals that can often be had at this time of year. To be sure, this is a critical holiday shopping season for discretionary and retail stocks.

The fiscal cliff could be right around the corner and job creation in the U.S. remains slack. Both scenarios could test consumers' willingness to part with what cash they do have this holiday season. On the other hand, it must be noted discretionary ETFs have not only held up well this year, these funds have been stellar performers.

With that, these are the must know ETFs for the start of the holiday shopping season.

Market Vectors Retail ETF (NYSE: RTH) It is hard to understand why, but the Market Vectors Retail ETF often goes overlooked in the discretionary/retail ETF conversation. Ignorance of RTH has not been bliss this year as the fund has surged 17.2 percent, but there is an issue investors need to be aware of.

RTH is home to just 26 stocks and it is a top-heavy fund. Wal-Mart, Home Depot (NYSE: HD) and Amazon (NASDAQ: AMZN) account for a third of RTH's weight. Some of the wind has been taken out of RTH's sails as the fund has lost 4.7 percent in the past month. If things go well on Black Friday and RTH can avoid violating support at $42.50, the ETF could be a trade worth taking soon and holding into the new year.

PowerShares S&P SmallCap Consumer Discretionary Portfolio (NASDAQ: PSCD) PSCD is the small-cap equivalent of the Consumer Discretionary Select Sector SDPR (NYSE: XLY). The focus on small caps does not mean PSCD offers up exposure to unfamiliar stocks. What it does mean is that the ETF is more volatile and it has proven as much recently.

Look at the charts of PSCD holdings such as Buffalo Wild Wings (NASDAQ: BWLD), The Children's Place (NASDAQ: PLCE), Jos. A Bank (NASDAQ: JOSB) and Steve Madden (NASDAQ: SHOO) to get a sense for just how volatile PSCD's constituents can be.

There are a couple of other traits that speak to increased risk with PSCD. The ETF does not skimp on exposure to auto retailers, one retail sub-sector that is out of favor with investors right now. Second, the ETF holds about 10 restaurant stocks, so with this fund it is not all about folks doing holiday shopping. It is about shopping AND eating out after or during that shopping.

SPDR S&P Retail ETF (NYSE: XRT) When it comes to the SPDR S&P Retail ETF, this is an ETF that needs some good cheer courtesy of Black Friday due to a precarious technical position. If XRT falls below $60 on strong volume, the fund could be in serious trouble and there is just no getting around that.

Approximately 10 of XRT's 96 holdings are members of the embattled auto retail sub-sector, but in the fund's favor is its equal-weight approach. Even when stripping out auto names, grocery store operators and the fund's largest holding Netflix (NASDAQ: NFLX), XRT offers ample exposure to traditional retailers. In addition, the fund does hold some higher end fare including Nordstrom (NYSE: JWN), Tiffany (NYSE: TIF) and Saks (NYSE: SKS).

Bottom line: XRT is a must watch Black Friday play and a strong start to the holiday shopping season could determine this ETF's near-term fate.

For more on ETFs, click here.

Posted-In: Long Ideas News Sector ETFs Short Ideas Technicals Retail Sales Events Intraday Update Best of Benzinga

 

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