Market Overview

Mendoza Line ETFs: Fall 2012 Edition

It has been several months since the last edition of Mendoza Line ETFs, but with the baseball playoffs drawing near, now is as good of a time as any to use baseball analogies with ETFs. For those that are only casual fans of baseball history, "Mendoza Line" refers to a batter whose average is below .200. That easily translates to the financial markets as the 200-day moving average is viewed as critical by technical analysts.

Here it is the 200-day simple moving average that is being used. The highlighted ETFs are all within 20 percent or less of that moving average. That criteria was used in an effort to find those funds that stand a reasonable chance of reclaiming the 200-day line in the near-term. Without further ado, here are five ETFs that could move above the 200-day moving average in the coming weeks.

Market Vectors Steel ETF (NYSE: SLX)

The epitome of a cyclical play, the Market Vectors Steel ETF was in rally mode prior to last week's quantitative easing announcement. That was enough to send the ETF above its 200-day line, but the subsequent pullback has SLX living the Mendoza Line dream. In other words, the ETF is just 3.2 percent below its 200-day moving average.

Given the high-beta nature of steel stocks, SLX could make up that gap in just two or three trading days. Critical to the ETF's fortunes is that it finds support at $46 if the pullback continues. That would indicate old resistance has turned to new support, a bullish sign.

Market Vectors Indonesia Small-Cap ETF (NYSE: IDXJ)

Prior to Tuesday's session, the Market Vectors Indonesia Small-Cap ETF was showing some signs of life. However, the light volume loss on Tuesday chased the fund back below its 50-day moving average at $16.

IDXJ is 11.5 percent from its 200-day moving average, so it has some work ahead of it. The first positive step would be to show some positive correlation to the Market Vectors Indonesia ETF (NYSE: IDX), something IDXJ has yet to really do. If IDXJ can start tracking its large-cap cousin higher, investors looking to up their Indonesian risk profiles might be apt to embrace the country's small-caps.

Global X China Consumer ETF (NYSE: CHIQ)

Despite having over $100 million in assets under management, the Global X China Consumer ETF leads a fairly anonymous existence. Then again, it is hard to standout when there are nearly 230 ETFs offering China exposure on the market today.

To CHIQ's credit, it is up 3.5 percent in the past month while the overrated iShares FTSE China 25 Index Fund (NYSE: FXI) is up less than a tenth of a percent. News of China's stimulus is already out. Now the question for CHIQ is how the country's stimulus efforts will benefit the ETF, which needs to gain just six percent to get back to its 200-day moving average.

iShares MSCI Israel Capped Investable Market Index Fund (NYSE: EIS)

Investing in EIS means more than just considering the ETF's 70 holdings. It means evaluating the region and what is going with Israel's neighbors.

Even amid rising tensions in the Middle East EIS has joined other ETFs with exposure to the region in moving higher in recent weeks. That alone is an impressive sign.

Now all EIS needs to do is gain less than two percent to get back to its 200-day moving average. If that happens, the mid-$40s is a legitimate destination for this ETF.

For more Mendoza Line ETFs, click here.

Posted-In: Long Ideas News Sector ETFs Short Ideas Emerging Market ETFs Technicals Intraday Update Markets Best of Benzinga

 

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