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31 Jul 08
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Anthony Welch isn't jumping on the rally in financial stocks that started after regulators clamped down on naked shorts on some of the sector's biggest stocks.
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The ETF technically still appears to be in a downtrend that began last July. "XLF broke below its 200-day moving average, which is a key long-term technical measure, then and hasn't come anywhere near it since," Welch said.
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The independent money manager and advisor to high net-worth and institutional investors would like to see financials at least move about their 50-day moving average for share prices. That's a key short-term metric. XLF is just a few percentage points below that level of just below $22 per share. "It stuck its head above that price several times in the past week," Welch said. "But it keeps meeting resistance and hasn't been able to break through."
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But he's sticking with PowerShares Water Resources (AMEX: PHO). So far this year through Tuesday, it remained in the black.
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The fundamentals are driving that outperformance, he adds. Demand for water treatment systems, technology related to water consumption along with a host of other components of PHO makes both short- and long-term prospects for the alternative energy fund strong, Welch says.
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Another long-term holding he's planning to keep is the iShares MSCI Singapore Index (NYSE: EWS).
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"Singapore is right in the middle of the action in Asia's economic development," Welch said. "It's a safer way to play China's growth and we really like the country's highly educated employment force. And it has a much more stable banking system than most of the rest of Asia."
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He's also holding onto the PowerShares DB G10 Currency Harvest (AMEX: DBV).
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On his radar is the PowerShares DB U.S. Dollar Index Bullish (AMEX: UUP). "It has technically held support at about $22.10 per share and remained in a tight trading range since March. If UUP breaks above about $23.25, we'll probably go long on it," Welch said.
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