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5 ETFs for the Next 5 Days: Rally Brings Edges to Bond and Bear Funds Alike

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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