There are hundreds of technical scenarios chartists swear by.
Head and shoulders formations, double tops, triple bottoms and
scores of others, but one of the most efficacious is the death
cross. Explaining the death cross to a six-year-old is easy. It's
the situation where a security's 50-day moving average crosses
below its 200-day line.
While no signal is 100% accurate, the death cross is at least
simple and frequently effective. We took a look at
five death cross ETFs on March 6 and the average
loss absorbed by the group since then is over 16%
With that performance and the market's downward gyrations in
recent weeks, we thought it would be a good idea to revisit the
death cross well. Some of the funds featured here have already
done the death cross dance while others are getting close.
Guggenheim S&P Global Dividend Opportunities Index
LVL, which is yielding over 5%, is heavy on financial services
stocks (24.3% of the fund's weight), but that exposure should be
tempered by an almost 24% to telecommunications issues. To be
fair, most of LVL's financial holdings are high yielding mortgage
REITs such as American Capital Agency (Nasdaq:
) and Annaly Mortgage (NYSE:
), not traditional money center bank stocks.
On the other hand, it's easy to see why LVL recently entered
death cross territory. Five Euro Zone nations combine for a third
of the fund's country weight.
iShares MSCI France Index Fund (NYSE:
Speaking of the Euro Zone, we present EWQ, the ETF tracking the
region's second-largest economy. There's not much of a good news
story with EWQ these days. Off 9.3% in the past month, the only
France-specific ETF is in a position where the death cross hasn't
happened yet, but it's really a matter of "when" not "if."
EWQ's largest holding, French oil giant Total (NYSE:
), has a compelling yield and valuation at the moment, but only
that stock directly is probably a better idea than using EWQ as a
proxy for Europe's third-largest oil company.
iShares MSCI EMU Index Fund (NYSE:
EZU's dalliance with death cross territory could be confirmed any
day now and like LVL and EWQ, the Euro Zone is the culprit,
though that should be obvious by the fund's name (EMU stands for
European Monetary Union). France and Germany account for almost
two-thirds of the ETF's weight, but the real problem is a 17.6%
allocation to financials and an almost 17% combined weight to
Spain and Italy. As TradeWithPete.com notes,
EZU's October low is the key technical area as a
break there coupled with that area turning into resistance would
be a bearish sign
Guggenheim S&P Equal Weight Energy ETF (NYSE:
In more sanguine market environments, it's not surprising to see
equal-weight ETFs outperform their cap-weighted counterparts. The
market is far from sanguine these days and not only has RYE
recently trailed the Energy Select Sector SPDR (NYSE:
), the Guggenheim fund recently earned a death cross. To be fair,
XLE isn't far behind. Any potential RYE has to correct its death
cross in the near-term hinges on its ability to hold support at
For more on energy ETFs, please click
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