Overall, most equity index ETFs are in overbought territory,
including top funds like the
SPDR S&P 500 ETF
(SPY |
PowerRating
) and the
iShares Russell 2000 Index Fund
(IWM |
PowerRating
) .
Internationally, the
iShares FTSE/Xinhua China 25 Index Fund
(FXI |
PowerRating
) is back in overbought territory below the 200-day moving average,
while the
iShares MSCI Brazil Index Fund
(EWZ |
PowerRating
) likely will enter overbought territory below the 200-day on any
significant follow-through buying on Wednesday.
For traders using PowerRatings, the highest rated ETFs heading
into Wednesday's trading tend to provide inverse exposure to the
precious metals market such as the top-rated
ProShares UltraShort Gold
(GLL |
PowerRating
) , which gained more than 7% on Tuesday. Learn more about
swing trading with PowerRatings
here
.
Here are 5 ETFs for the Next 5 Days
With Tuesday's big rally that saw the Nasdaq gain by 100 points,
it is no surprise that the exchange-traded funds with the biggest
edges are in two categories: bond funds and short funds.
For example, looking at the entirety of our ETF database, the
top two most oversold ETFs trading above the 200-day moving average
as of Tuesday's close are the
iShares Barclays 1-3Yr Treasury Bond Fund
(SHY |
PowerRating
) and the
iShares iBoxx $ Investment Grade Corporate Bond
Fund
(LQD |
PowerRating
) .
The sell-off in LQD has been especially noteworthy. LQD has
closed lower for three days in a row and plunged by more than 1% -
a huge move for this bond ETF - in Tuesday's trading.
In addition to these pullbacks in bond funds, short funds (also
known as inverse or bear funds) have also slid lower and into
oversold territory above the 200-day moving average. Among these
are equity index related inverse ETFs like the
ProShares UltraShort QQQ
(QID |
PowerRating
) and the
ProShares UltraShort MSCI Emerging Markets
(EEV |
PowerRating
) , as well as funds that allow traders to take the bearish side of
the energy market with oversold leveraged ETFs like the
ProShares UltraShort Oil & Gas
(DUG |
PowerRating
) .
Click here
to find out why
High Probability ETF Trading: 7 Professional Strategies to Improve
Your ETF Trading
by Larry Connors and Cesar Alvarez was called "one of the best
trading books of 2009" by the editors of SFO Magazine
.
David Penn
is Editor in Chief of TradingMarkets.com