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David Penn
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David Penn is Editor in Chief of TradingMarkets.com.
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Larry Connors: Short Term Trading Strategies That Work
  • 5 ETFs for the Next 5 Days (EWC, EWM, EWZ, XLP, GDX) 0 comments
    Dec 21, 2010 2:06 PM | about stocks: EWC, EWM, EWZ, XLP, GDX, FXI, IWM, GLD

    As I noted in this morning in my 7 ETFs You Need to Know for Tuesday column at TradingMarkets, many of the exchange-traded funds that were overbought were commodities related or small cap equity related.

    An example of the former would be the PowerShares DB Agriculture Fund ETF (NYSEARCA:DBA).  And example of the latter would be the iShares Russell 2000 Index Fund ETF (NYSEARCA:IWM).  Both are continuing to move higher intraday on Tuesday and becoming increasingly overbought.

    Those ETF markets that were on the retreat heading into Tuesday were largely international equities ETFs like the iShares S&P Europe 350 Index Fund ETF (NYSEARCA:IEV) which was up by a modest amount halfway through trading on Tuesday after pulling back into oversold territory above the 200-day moving average.

    Even more impressive is the gain of more than 2% in the iShares FTSE/Xinhua China 25 ETF (NYSEARCA:FXI). The fund had become extremely oversold, closing in oversold territory above the 200-day for four consecutive trading days, before Tuesday's big bounce higher.

    Looking forward, here are some of the ETFs that high probability traders will be keeping an eye on over the next few days.

    Two country funds that are in oversold territory as of intraday Tuesday are the iShares MSCI Canada Index Fund ETF (NYSEARCA:EWC) and the iShares MSCI Malaysia Index Fund ETF (NYSEARCA:EWM).  EWC is on pace to close lower for six consecutive trading days above the 200-day.  EWM is looking likely to close lower for five.

    Down two days in a row heading into midweek was the iShares MSCI Brazil Index Fund ETF (NYSEARCA:EWZ).  EWZ was last oversold two weeks ago, when a four-day pullback led to a three-day rally.

    While most of the ETFs in oversold territory above the 200-day are country funds, the Consumer Staples Select Sector SPDRS ETF (NYSEARCA:XLP) has also been pulling back in recent days - albeit mildly.  The profit-taking in the ETF comes after a strong intermediate run over the course of the first half of December.

    Lastly, traders interested in the gold market may want to keep an eye on the Market Vectors Gold Miners ETF (NYSEARCA:GDX).  The fund dipped into oversold territory intraday on Thursday, despite the strength in the ETF's bullion-based counterpart, the SPDR Gold Trust ETF (NYSEARCA:GLD).

    Read Larry Connors latest column at TradingMarkets: Managing Your Money in Rising Markets with The Machine.

    An excerpt: These four rules combined have consistently shown historically above average edges since 1989. The Machine displays data starting from 2001, but we have internal studies going back over two decades showing the same behavior. During this period of time there have been wars, multiple presidents, an internet boom/bust/boom, a major credit expansion followed by a major credit crisis, along with dozens of other major political and economic events. Yet these strategies have consistently performed year after year, better than any other trading philosophy that has been published.

    Stocks: EWC, EWM, EWZ, XLP, GDX, FXI, IWM, GLD
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