These Death Cross ETFs Could be in Big Trouble (EGPT, DFE, FAA)
It seems like only yesterday that we were discussing ETFs for the golden cross the technical condition where a security's 50-day moving average rises above its 200-day line.
Unfortunately, the way the broader market acted today means it's probably time to consider another technical condition: The death cross. The bear to the golden cross' bull, a death cross occurs when a security's 50-day line falls below the 200-day moving average. From there, things can get really ugly.
What may be cause for concern is that even when stripping out the leveraged funds, the number of ETFs that are sporting death cross conditions numbers in the hundreds. Here are a few that have been living under the clouds of a death cross for a while now and are especially vulnerable to global macroeconomic risk, the problem plaguing the markets over the past couple of days.
Global X Copper Miners ETF (NYSE: COPX) Follow us for a minute as we explain the myriad issues facing COPX. It can be argued that this really isn't a death cross ETF per se because even during the January/February rally, COPX never made a golden cross. Conversely, it can be said that COPX has been stuck in death cross mode for far too long and now there are fundamental concerns as well. Or we can just make things really easy and say that consecutive closes below $14 are not good news for this ETF.
WisdomTree Europe SmallCap Dividend ETF (NYSE: DFE) The death cross for the WisdomTree Europe SmallCap Dividend ETF occurred back in August and the ETF's strong year-to-date run prior to Tuesday had it within spitting distance of making a golden cross and a confirming a legitimate uptrend. That dream is going to be put on hold for a few days at least.
If Greece is one of the catalysts for the sell-off, then the combination of Europe and small-caps is suddenly unappealing, regardless of the dividend kicker. The yield here is almost 6%, but looks poised to rise in the near-term, so don't take the bait.
iShares MSCI Israel Cap Investable Market Index Fund (NYSE: EIS) You'll have to go back to July 2011 to spot when EIS made its death cross and while eight months is an eternity in the financial markets, it should also be sufficient for an ETF to get its act together. EIS has tried, but to no avail. The ETF has spent only a few days this year above its 50-day line, is currently about 12% below its 200-day line and with another bad day or two, the ETF will go negative on the year. Tensions with Iran aren't helping the matters.
Market Vectors Egypt Index ETF (NYSE: EGPT) This ought to paint the picture of how ugly 2011 was for EGPT: Even with a year-to-date gain in 2012 of over 50% before today, the ETF hasn't even come close to making a golden cross. The current distance between the 50-day and 200-day lines is less than 75 cents and with EGPT vulnerable to politics and an emerging markets pullback a death cross could appear sooner than later.
Guggenheim Airline ETF (NYSE: FAA) So close yet so far away. The Guggenheim Airline ETF is another example of a death cross that was made long ago that was close to being fixed with a golden cross. Problem here is even oil prices fall moderately, skittishness over the global economy is back and that won't prompt "panic buying" in this thinly traded ETF.
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