Today I was running some scans on ETFs looking for what is moving up and down in the current market cycle. To me the purpose is to find sectors or industry groups that don’t show up as you normally review the markets. This is where you can find rotation from US equities to global equities as we discussed on Monday night’s webinar. This is where you see Russia (RSX) breaking from a trading range, and Treasury bonds (TLT) moving 1.1% today and back to resistance at the $132.21 level. The point is ETFs are a great tool for find the leaders, the losers and the laggards in the market and the opportunities they present looking forward. Below are some of the top ideas from today’s scans.
RUSL – Direxion Daily Russia Bull 3x ETF. Technically broke the micro term (0-13 weeks) down trendline and reinforcing the reversal off the low March 13th. The risk of the fund is obvious since it is 300% leveraged. Throw in the risk of it being Russian stocks and you compound the risk. You can trade RSX and avoid the leverage risk and only deal with the fact it is Russian stocks. Expect volatility as the country finds a way to make in the headlines almost daily.
YINN – Direxion China Bull 3x ETF. The fund hit a new high on Monday and confirmed the break higher today. Again we are in the global markets. It is China and looking at the chart you see the volatility. The leverage adds to the risk of the ETF as well. FXI is the unleveraged version of trading the country, but you still have the emerging market risk of China. Despite the bantering about China and the bubble real estate market the stocks continue to move higher on the promise of stimulus. Take it for what it is… a trade short term (0-9 months) and manage your stops.
SLV – iShares Silver Trust ETF. Reversed off the low March 11th and ran to the $16.40 resistance level. Still attempting to make it through this level and if it can accomplish the feat… could offer more upside in the metal. The risk of commodities is equally challenging for investors going forward. Invest with your risk tolerance in mind and have a predefined exit strategy if the metal does unfold on the upside.
EEM – iShares Emerging Markets ETF. Another global ETF that pivoted off the March 13th low and made a move higher today. The $41.06 mark is the level to clear to get through the congestion near term. Watch the dollar and other geopolitical issues developing around the globe. Bottom line… manage the risk of any positions in the emerging markets.
EWZ – iShares Brazil ETF. This is in a confirmed downtrend long term, but the chart is building another base that could present some upside opportunities. The March 13th low is the pivot point and it has set up a double bottom pattern or potential trend reversal. Worth watching short term to see how it unfolds as the rumors about the worst being over in Brazil unfold. Look for validation of both the fundamentals and the technicals on the country.
IWM – iShares Small Cap ETF. The uptrend off the January low remains in place and despite the recent volatility the sector shows promise looking forward. A look at the weekly chart show the uptrend off the October lows in place. Patience in the sector should be rewarded as we move forward.
IJH – iShraes Mid Cap ETF. This has been the best looking sector based on the chart. The weekly chart show a solid uptrend with the only anxiety a result of the October sell off. The long term regression line shows a solid uptrend in place for the sector. A test or pullback would be a good opportunity to add to positions based on the current outlook.
I don’t want to overwhelm you with to many ideas, but these jumped out of the scan tonight and they are worth putting on a watch list and developing a defined strategy for investing going forward. As with any investment we must take into account our risk tolerance, the risk of the market currently and our escape plan if what we believe to be true isn’t. Investing money is always about investing based on your belief and managing the risk with a defined plan. We continue to take this one day at a time.