Let's quickly clear up that headline. Not all of the
that will be highlighted here have violated a key moving average
such as the 50- or 200-day lines.
However, the funds that will be discussed here have another
problem: Plenty of their components have recently fallen below
their simple 50-day moving averages.
This is important because despite what some critics would have
investors believe, when it comes to equity-based ETFs it is the
fund's underlying components (the stocks) that determine price
action for the ETF.
With that in mind, a screen for large-cap stocks trading below
their simple 50-day moving averages was run to see if multiple
stocks popped up from the same sectors. The thesis being that
that would be an important clue regarding which ETFs potentially
technically vulnerable in the near-term. Here is what the screen
iShares FTSE China 25 Index Fund (NYSE:
) Given the disappointing start to 2013 turned by Chinese
equities, it is not surprising that FXI is languishing about 4.6
percent below its 50-day line. Technically speaking, things could
get worse before they get better.
The screen turned up just four
mega-cap stocks trading below their 50-day
. Two are China Mobile (NYSE:
) and PetroChina (NYSE:
), which combine for over 13 percent of FXI's weight.
China Unicom (NYSE:
), China Telecom (NYSE:
), China Life Insurance (NYSE:
) and Sinopec (NYSE:
) all fall into the same category. Remember, FXI is only home to
26 stocks and at least six are below their 50-day moving
averages. The six FXI constituents mentioned here combined for
roughly 28 percent of the ETF's weight.
iShares S&P Global Energy Sector Index Fund (NYSE:
) After recently dropping below its 50-day line, the iShares
S&P Global Energy Sector Index Fund has ever so slightly
risen back above that important technical indicator. How long
those good times will last appears to be a tricky call to make.
Here is why.
Royal Dutch Shell (NYSE: RDS-A), Europe's largest oil company,
is one of the other mega-cap names residing below its 50-day
line. So are some of Shell's major rivals, including BP (NYSE:
) and Total (NYSE:
). That trio combines for almost 17 percent of IXC's weight.
Other global oil names with U.S. shares below the 50-day line
include the aforementioned Chinese names, Ecopetrol (NYSE:
), Encana (NYSE:
) and Petrobras (NYSE:
). All of those stocks are also IXC constituents.
Market Vectors Agribusiness ETF (NYSE:
) This is a fairly straight-forward scenario. In alphabetical
order, here a few of the MOO holdings residing below their 50-day
lines, which explains why the same fate has befallen the ETF:
), Bunge (NYSE:
), CF Industries (NYSE:
), Deere (NYSE:
), Mosaic (NYSE:
) and Potash (NYSE:
Those are six of MOO's top-14 holdings and three of the ETF's
top-10. Combined, Deere and Potash are nearly 13 percent of the
ETF's overall weight.
SPDR S&P International Health Care Sector ETF (NYSE:
) IRY was
recently mentioned as one of several unheralded
global health care ETFs
. For the moment, it might be left undiscovered because although
the ETF is trading above its 50-day moving average, a decline
below that level could be in the offing.
IRY is home to 117 stock, but the top 10 holdings represent
nearly 60 percent of the fund's weight. Of that group, the screen
shows AstraZeneca (NYSE:
), Sanofi (NYSE:
) and Teva (NASDAQ:
) all below their 50-day lines. That trio equals about 14.4
percent of IRY's weight.
The news could get worse. At least two other IRY top-10
holdings - GlaxoSmithKline (NYSE:
) and Novo Nordisk (NYSE:
) - are within pennies of giving up their 50-day moving
For more on ETFs, click
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