Market Overview

ETF Laggards That Could Stay That Way (BAL, EIS, TAN)


Where there are winners, there are probably some losers right around the corner. That can be especially true in the financial markets, but the good news is some of yesterday's laggards can become tomorrow's leaders.

On the other hand, bottom-fishing for ETF laggards can be a tricky endeavor. Not all will deliver upside, no matter how long investors wait. Worse yet, some ETFs that reside at the bottom of the barrel are destined to stay that way, at least over the near-term.

Here are some prime examples of ETFs that have been cascading lower recently and show few, if any, signs of turning higher anytime soon:

iShares S&P North American Technology-Multimedia Networking Index Fund (NYSE: IGN) There has not been much to like about the iShares S&P North American Technology-Multimedia Networking Index Fund in recent months. Over the past three, the ETF has plunged 22.7 percent. IGN now trades around $23, a neighborhood the fund has not resided in since July 2009.

Amid a fragile U.S. economy and the Eurozone sovereign debt crisis, spending on technology and related services could easily slow in coming quarters. That is bad news for stocks such as Cisco Systems (NASDAQ: CSCO), F5 Networks (NASDAQ: FFIV) and Juniper Networks (NASDAQ: JNPR). That trio combines for a quarter of IGN's weight. Making matters worse for IGN is the fact that Research In Motion (NASDAQ: RIMM) is the ETF's tenth-largest holding.

iPath DJ-UBS Cotton TR Sub-Index ETN (NYSE: BAL) With everyone talking about corn's amazing run, the continuing fall in cotton prices is going somewhat unnoticed.

Well, BAL faces a nightmarish scenario for any commodities ETN: Plunging prices and rising inventories. Cotton futures have slid almost 30 percent in the past year, but inventories are at record highs. With demand waning thanks to a slowing U.S. economy and disappointing emerging markets growth, down is the path of least resistance for cotton futures.

This is how fast BAL can fall: In March 2011, the ETN traded over $110. By mid-September 2011, BAL was hovering around $70. The ETN closed below $47 on Tuesday.

iShares MSCI Israel Capped Investable Market Index Fund (NYSE: EIS) In a more sanguine market environment, the tribulations of the iShares MSCI Israel Capped Investable Market Index Fund could be blamed on geopolitical tensions in the Middle East. To be sure, volatility in that corner of the world has been one reason EIS has slid 16 percent in the past 90 days. However, a new issue is creeping into the conversation and it is more bad news for EIS: Israel's economy is believed to be slowing.

EIS is trading in a price area it has not seen in over three years and if support at $35.75 gives out, the low $30s could easily be tested.

Guggenheim Solar ETF (NYSE: TAN) Solar stocks and ETFs just cannot seem to catch any breaks. By its lowly standards, the Guggenheim Solar ETF was not all that bad for most of June. That sort of good work has been undone over the past couple of weeks as the fund has slid almost 10 percent in the past month. Not only is the solar damaged goods in the near-term, the long-term prognosis is bleak too. TAN looks like it could fall another 10 percent from current levels to test support at its 200-day moving average.

For more on ETF laggards, click here.

Posted-In: Long Ideas News Sector ETFs Short Ideas Specialty ETFs Futures Technicals Commodities Best of Benzinga


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