The S&P 500 is in the midst of four-session pullback, it’s longest in over two months.
The selling has not been dramatic as the index still trades within one percent of an all-time high. However the fact sellers have been in control for nearly one week is significant.
The big picture shows a stock market and more specifically an index that is extremely bullish. In the short-term the S&P 500 is overbought and overdue for a normal pullback in price. There is currently price support and the 50-day moving average at the 1747 area, which would be considered an area where the index should begin to attract big buying again.
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Everyone knows that the charts are not perfect, but successful investor also realize the market never goes straight up and pullbacks are integral to a strong bull market. It appears that stocks are in the midst of one of these pullbacks and investors need to be ready to take advantage of the weakness to add new money into ETFs.
Three ETFs that should be considered are below.
First Trust Dow Jones Internet Index ETF (NYSE: FDN)
The ETF is a basket of 41 stocks that derive at least 50 percent of their annual revenue from the internet. The top holdings are a who’s who of technology stocks with Google (NASDAQ: GOOG) making up the largest allocation at 11 percent. Other top names include Amazon.com (NASDAQ: AMZN)andFacebook (NASDAQ: FB).
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The ETF is up 44 percent in 2013 and has recently been pulling back from an all-time high. The 50-day moving average has acted as support during the last few pullbacks and that level is currently at $54.67.
iShares U.S. Healthcare Providers ETF (NYSE: IHF)
The ETF is composed of 49 stocks that include health insurance companies as well as operators of hospitals, clinics, and health care facilities. The auspicious implementation of Obamacare has not had a negative affect on the health care providers. As a matter of fact, the ETF is three day removed from an all-time high.
For the year, IHF is up 34 percent and has one of the better charts in the market. The current pullback could see the ETF retest the old high at the $90 area in the coming days. With lots of support in the area the likelihood of the ETF holding above $90 is high. The two largest holdings, making up 24 percent of the ETF, are Unitedhealth Group (NYSE: UNH)and Express Scripts Holding (NASDAQ: ESRX).
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