These EM ETFs Are Stuck in Bear Markets
Stocks and ETFs that reside below their respective 200-day moving averages are, by many technical analysts, believed to be showing bearish signs. Those securities that have fallen 20 percent or more from their peaks are said to be in outright bear markets.
With the broader market's November tumble still ongoing, an increasing number of ETFs and ETNs are sporting both ominous technical conditions. The affliction is especially prominent among emerging markets ETFs, underscoring the notion that valuation alone is not enough to spur some markets higher.
Ignoring these technical signs could prove treacherous. For those looking for opportunities from the short side or for risk-seekers looking for bounces to the upside, the following emerging markets funds are worth keeping an eye on.
iShares MSCI Brazil Index Fund (NYSE: EWZ) Aside from what proved to be a false breakout in September, the largest Brazil ETF has spent no time above its 200-day line since April. November has not been kind to EWZ as the ETF is off almost four percent, frustrating investors that thought the fund was showing signs of life in late October.
Increased government regulation and rising consumer debt among Brazil's economic hurdles, but the overall, long-term fundamental outlook is more bullish than bearish. That said, patience is not a virtue held by all investors and in the near-term, EWZ is a fairly simple trade.
The ETF has shown a tendency to honor the $49-$50 area as support several times in recent months, bouncing as much as 10 percent from that area. If EWZ declines to that area and holds there, the fund is a legitimate swing trade from the long side. Conversely, if that price range is violated on heavy volume, buying some EWZ put options could prove to be a smart move.
EGShares Emerging Markets Metals/Mining ETF (NYSE: EMT) Structurally, there is nothing wrong with the EGShares Emerging Markets Metals/Mining ETF. In fact, in a risk on environment where high-beta sectors and emerging markets are in favor, this fund would command a spot at the top of savvy investors' shopping lists. Unfortunately, that is not the reality of the current environment.
EMT's price-to-earnings and price-to-book ratios imply the ETF trades at a discount to the broader emerging markets universe. That is not surprising given that analysts and investors have said Brazilian, Chinese and Russian equities all look cheap and those nations combine for over 51 percent of EMT's weight.
EMT now resides more than 26 percent below its 52-week high and 9.3 percent below its 200-day line. The fund closed at $13.26 on Wednesday, but those looking for a long trade would do well to wait for EMT to retest support around $12.50.
Market Vectors India Small-Cap ETF (NYSE: SCIF) The Market Vectors India Small-Cap ETF is one of the funds that epitomizes what has been a turbulent year for Indian equities. Even though SCIF is up almost 19.5 percent year-to-date, the ETF is nearly 26 percent below its February high and recently tumbled below its 200-day moving average.
Thanks to government reforms aimed at increasing foreign investment, India ETFs rallied from September through early October. During that time, SCIF moved to just over $11 from $9. Assuming a 50 percent retracement of such a move is in the offing, SCIF would need to fall back to the $10 area before it becomes a buy again.
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