International Shipping ETFs Beat U.S. Counterparts by a Mile

Oil pierces $60 per barrel. China acquires stakes in major materials companies around the globe. And investors demonstrate a willingness to bid up emerging market share prices... even with swirling doubts about how long it'll take for the U.S. to get its act together.

But wait... there's more. The notion that the economies of foreign nations may recover before the U.S. is further supported by land, sea and air.

Specifically, the iShares Dow Transports (IYT) is signaling a cautious yellow light on the prospect that we're moving goods in America, while PowerShares Global Progressive Transports (PTRP) and Claymore Delta Global Shipping (SEA) tell a more promising tale.

Consider a popular technical theory called "Dow Theory." This simple concept assumes that a relationship must exist between the makers of industrial products (i.e., "industrials") and the "takers" of those goods (i.e., transports).

It follows that Dow theorists believe that a new bull market must be confirmed both by the Dow Industrials (DIA) and the Dow Transports (IYT). In essence, this would occur if both index proxies are hitting higher highs together.

It's true that DIA and IYT hit their recent May 8, 2009 highs together. However, since that period, DIA has continued to find buyers near that recent high, and is currently a mere half percentage point from reaching it again here as I type on May 26, 2009. In contrast, the Dow Transports (IYT) is about 7% below its 5/8/2009 high.

All in all, a Dow Theorist might flash a yellow "cautious" light. Meanwhile, the PowerShares Global Progressive Trapsort (PTRP) is breaking to new highs once more. Claymore Delta Global Shipping (SEA) is also witin 3 percentage points of a new peak.

I am not recommending these specific ETFs. The volume is painfully thin. That said, it is important to recognize that you have a global transport index that is above its 200-day, long-term moving trendline, while the domestic Dow Jones Transports (as well as the Dow Industrials) is below it.

If a sustainable bull market uptrend exists anywhere, it exists overseas. And whether it's the basic belief that emerging economies will recover faster than developed economies... or whether it's extreme risk taking that'll get beaten badly in the next bout of heavy selling... there's more reward abroad.

If you are pursuing the bigger reward, and would like to mitigate the risk, make sure you understand how to use stop-losses. Moreover, make sure that you're not purchasing different ETF names that are birds of the same feather; otherwise, you will wind up owning very similar stuff!

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

Comments

[buyitcheap:]

Didn't think there was much of a weighting of the ocean shippers in the DJT...

May 27 06:58 PM