Market Overview

Sound of the Seasons: More ETFs for Seasonal Trends


The classic "sell in May" strategy worked flawlessly in 2012, and that price action has persisted into June. Select bearish ETFs have seen great performance this month.

With July just a few days away, now is a good time to examine some ETFs that could be valid seasonal plays over the next 30-60 days. This list is not based on hunches, gut feelings or what "looks good" at the moment. In most cases, the sectors featured on this list have track records of making compelling bullish or bearish moves over the time frames outlined here.

Investors can make the trend their friend over the next month or two with the following ETFs:

Global X Fertilizers/Potash ETF (NYSE: SOIL) Here is a great seasonal factoid that arguably has not gotten the attention it deserves: Fertilizer stocks and ETFs have a penchant for rewarding investors starting in late June and running through the end of the year. Citing Thackray's 2012 Investor's Guide, The Globe and Mail reports Potasch (NYSE: POT), has a period of season strength from June 23 to January 11.

That trade on the world's largest fertilizer producer has been profitable during 18 of the past 20 periods with an average return of just over 23 percent, the paper reported. SOIL has a 5 percent weight to Potash while the stock receives an allocation of almost 8 percent in the Market Vectors Agribusiness ETF (NYSE: MOO).

iShares Dow Jones Transportation Average Index Fund (NYSE: IYT) In theory falling oil prices should be a boon for an ETF like IYT. In reality, the ETF has gotten no love from crude's recent slide and is down 1.6 percent in the past month. Making matters worse for IYT (and its economically sensitive lineup) is that the July-October time frame is not when one wants to long this fund. In fact, The Stock Trader's Almanac advises shorting transports in mid-July. The trends highlighted in the Almanac are rarely wrong.

First Trust NYSE Arca Biotech Index Fund (NYSE: FBT) The early August through early March time period is typically a good time to own biotech stocks, but given the way the First Trust NYSE Arca Biotech Index Fund has performed this year, investors might not want to wait that long.

FBT has been far and away the top-performing major biotech ETF this year. Beyond that, the ETF is on a short list of sector funds that look even remotely trustworthy in the current environment.

The FDA is slated to have a busy summer commenting on and approving new drugs. That catalyst alone could boost FBT and other biotech ETFs in advance of the sector's traditional seasonal trends.

For more on ETFs and seasonal trends, click here.


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