More Golden Cross ETFs
A market rally through the often lethargic summer months and into the early part of September, traditionally the worst month of the year for equities, may have caught a lot of investors off guard. There is some good news, though and it comes in the form of the technical analysis phenomenon known as the golden cross.
The easy definition of a golden crosss is that it occurs when a shorter term moving average crosses above a longer term moving average. Since many technical analysts place more emphasis on longer term moving averages, the golden cross is viewed as significant in terms of upside potential. Plus, the longer term moving average can also turn into a new support area following the golden cross.
Not indicator is 100 percent foolproof, but there are a decent amount of ETFs that recently experienced golden crosses or are getting close. For the purposes of this list, only 50- and 200-day simple moving averages were used.
Industrial Select Sector SPDR (NYSE: XLI)
The Industrial Select Sector SPDR joined the golden cross club in late August, a bullish sign considering this ETF's high-beta constituents and the sluggish U.S. economy. XLI, which has $3.3 billion in assets under management, has risen 0.76 percent in the past month, but despite the decent technicals, this ETF could be undone by an unfavorable macroeconomic picture.
Economically sensitive names such as United Parcel Service (NYSE: UPS), Union Pacific (NYSE: UNP), Caterpillar (NYSE: CAT) and Boeing (NYSE: BA) combine for about 19 percent of the fund's weight. That implies XLI can only rally on technicals for so long before the tepid broader economy comes home to roost with this ETF.
Energy Select Sector SPDR (NYSE: XLE)
Another SPDR fund chock full of high-beta names makes the list in the form of the Energy Select Sector SPDR (NYSE: XLE. The largest energy ETF by assets experienced the golden cross just a few days ago and the ETF has jumped 1.7 percent in the past month.
XLE's chart is stronger than XLI's as the former has broken through resistance at $72 and looks poised to run to its 52-week high just below $76. Dow components Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX) combine for over 34 percent of this ETF's weight.
iShares MSCI Poland Investable Market Index Fund (NYSE: EPOL)
The iShares MSCI Poland Investable Market Index Fund is another new addition to the golden cross club and the crossover has certainly led to some bullish action. EPOL has gained over six percent in the past week.
Since it is not a Eurozone member, Poland has been viewed as one of the steadier economic hands in Europe. However, this is still an emerging market and that means investors want more in terms of economic so that they are adequately compensated for taking on developing nation risk.
Poland did not deliver on that in the second quarter posted GDP growth 2.4 percent. That was well below the 2.9 percent economists expected and well below the 3.5 percent growth seen in the first quarter.
Poland's second-quarter GDP report underscores the good news/bad news scenario when it comes to investing in the country. The good news is Poland's economy is not export-dependent. The bad news being it was slack domestic demand that weighed on the economy in the previous quarter.
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