Nobody has ever predicted the future with consistency; yet, that has never stopped investors, speculators or economists from trying.
Perhaps the most common forecasting endeavor for market enthusiasts is the identification of price trends. Simply stated, millions of individuals as well as major institutions make financial decisions based upon where the price of a given security is in relation to a moving average (MA) of prices for that security.
Trend-followers and chartists may discuss a variety of different time periods. Nevertheless, the most frequently employed MAs are the 50-Day and the 200-Day.
Many describe the 50-Day - a 10-week period of trading activity - as a short-term or intermediate-term trend. When the current price of a security is above a 50-Day MA, you have a short-term uptrend... when the price is below a 50-Day MA, you have a short-term downtrend.
While short-term downtrends infrequently mark the end of longer-term cyclical bull markets, they sometimes do. More importantly, short-term downtrends for certain economic segments or particular asset types may signify a change in market leadership.
Here are 5 ETFs that are flashing a yellow caution light:
|5 Key ETFs Below Respective Short-Term Trendlines|
|% Below 50-Day EMA|
|SPDR Capital Markets (KCE)||-2.34%|
|iShares MicroCap (IWC)||-0.85%|
|HOLDRS Regional Banks (RKH)||-0.80%|
|SPDR Homebuilders (XHB)||-0.52%|
|iShares GS Networking Fund (IGN)||-0.10%|
Two ETFs, SPDR Homebuilders (XHB) and Regional Banks (RKH), are telling us things that we already know; specifically, exposure to building and/or commercial lending is the riskiest of business.
More troubling for those who see economic recovery, the smallest company stocks are fighting for folks to invest in them. Not only has iShares MicroCap (IWC) fallen below a near-term trendline, but the iShares Russell 2000 SmallCap Fund (IWM) is also teetering. How can investors take comfort in an economic recovery when small businesses aren't creating jobs and aren't getting better access to credit?
If you'd like to learn more about ETF investing... then tune into In the Money With Gary Gordon. You can listen to the show LIVE, via podcast or on your iPod.
Disclosure Statement: ETF Expert is a web log (blog) that makes the world of ETFs easier to understand. The content does not represent investment advice, nor are the securities discussed suitable for every investor. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.