Although stocks have broadly come back in the first quarter of
2013, some sectors have had trouble keeping up. This is
especially true in the commodity space, and particularly in the
commodity producer segment.
Investors have seen incredible weakness in this corner of the
investing world thanks to a strong dollar, uncertain demand from
international markets, and a broad push to other segments of the
market. Plus, these producers usually act as leveraged plays on
the underlying commodities, so when commodities are slumping,
these firms are truly hurting (read
Time to Sell this Commodity ETF?
Investors in the
Steel ETF (
are getting pretty familiar with this trend in 2013, continuing
the rough time that many have seen in this corner of the ETF
world. The product is now down double digits in 2013 and could be
facing more weakness ahead as well.
That is because this underperforming fund recently saw some
bearishness in some key simple moving averages, with short-term
figures falling below longer term ones. This crossover suggests
that the short term trend is decidedly bearish, and that more
pain could be ahead for this ETF in the future.
Investors should also note that while we do not possess a
Zacks ETF Rank on steel funds at this time, we can look to both
the mining and steel segments in the stock Zacks Rank, which are
the primary components of SLX, for some clues. Both of these
aren't pretty though, as the miscellaneous mining sector is
currently ranked in the bottom 25%, while the steel segment is in
the bottom 20% (see
Steel ETFs Head-to-Head
This suggests that, at least from an earnings estimate
revision perspective, the steel ETF could be facing some more
trouble in the future. And with the broad macro troubles
afflicting the sector, it is easy to see why the space might be
in for more of a rough patch going forward.
It is hard to be bullish on the steel ETF at this point in
time. Nothing appears to be working out for the ETF as weakness
is signaled by fundamentals, the Zacks Rank, and even from a
technical perspective as well (see
5 Sector ETFs Surging to Start 2013
As a result, it is probably better for most investors to avoid
this segment for the time being, at least until the outlook
starts to improve for steel. Better to focus in on surging
industrial sectors and less dollar-sensitive segments, until
sentiment turns on this troubled sector.
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