I still don't trust this market. That doesn't mean I'm not taking a few shots on the long side with swing trades, but it has been single-stock focused. If I were going to wade into ETF land, I would do so cautiously right now and likely nibble at positions I thought would outperform if the market turned lower.
From the equity side, I would use the Consumer Discretionary Select Sector SPDR Fund (XLY) for a somewhat broad-based exposure despite the use of the word "sector." Yes, this one is consumer cyclical, but when you review some of the top holdings in the fund you realize that it is blue-chip based with names that are often tied to the overall market.
Amazon (AMZN) makes up almost one-fifth of XLY followed by the likes of Home Depot (HD) , Action Alerts PLUS holding Comcast (CMCSA) , Disney (DIS) , McDonald's (MCD) , Netflix (NFLX) , Priceline (PCLN) , Nike (NKE) , and Starbucks (SBUX) to round out some of the biggest holdings. Absolutely consumer based, but also touching many industries. Fast food, retail, home improvement, entertainment/media, and travel. That's a fairly wide list for a "sector" ETF.
With XLY trading slightly below $103, it is still above multiple support triggers. Those support and trend lines all convene in the $97.50 to $98.50 area, providing a clear stop. If that area fails, then I suspect the ETF will retest the $90-92 range.
In short, if XLY closes below $97.50, then the position should be hedged or closed. That's clarity and takes emotion out of managing the position. If the market does correct or drop again, we want to limit emotion. That's what makes XLY a top candidate on the ETF side of the investment playing field.
Switching gears, the yen has been a big benefactor of the weakening U.S. dollar and volatility stateside. Before anyone jumps on me about how the CurrencyShares Japanese Yen Trust (FXY) will fall if equities rise, note the correlation on the bottom of the FXY chart, below. While the ETF does spend more time in negative territory (inverse correlation), nothing is strong and it is more random then set. Plain and simple, a close above $89.50 puts FXY into breakout mode.
The $84-89 trading range has persisted for over a year, so FXY is coiled and ready to go. I wouldn't buy until the breakout occurred. Twice in the past nine months it has failed right at these levels with all three setups identical. History may not repeat, but it does rhyme often enough for me to react on this one rather than anticipate.
Lastly, I would get sector specific with the iShares U.S. Real Estate ETF (IYR) . Any more market hiccups will likely influence the Fed to ease off the rate hikes. As it stands, IYR is currently one of the most oversold sectors in the market.
Over the past two weeks, two long tails have formed in the price action. This is often indicative of seller exhaustion. If I were choosing a single bounce candidate, IYR is it. The stock here is on a weekly close below those two black support lines encasing $71. Expect sellers to get aggressive on any move into the $76-77 zone, so some partially profit-taking or maintaining a tight trailing stop is an absolute trading must.
I'm attracted to the technical clarity offered by all three of these ETFs. There's some high level fundamental/economic support for owning any or all of them as well. Still, when volatility creeps in I prefer to use price action first when seeking out trades I believe will outperform the overall market.