+ 0.00
+ 0%
+ 0.00
+ 0%
+ 0.00
+ 0%
+ 0.00
+ 0%
+ 0.00
+ 0%

Further Confirmation Materials ETFs Are Imperiled

April 2, 2013 1:45 pm
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More
Further Confirmation Materials ETFs Are Imperiled

With the S&P 500 up about 0.7 percent today and having touched a new record high, it is not hard to find the laggards among sectors ETFs. There are a few funds tracking the oil and semiconductor sub-segments that are in the red, but those losses are not yet alarming.

The real cause for concern remains the materials sector. The Materials Select Sector SPDR (NYSE: XLB) is down 0.54 percent today, and while that may not sound like much, remember that XLB was by far the worst performer of the nine sector SPDRs in the first quarter. XLB’s first-quarter gain was not even half of what the SPDR S&P 500 (NYSE: SPY) returned.

Tuesday may be just one day, but the problem for XLB and other materials ETFs is that this far from the worst day this year these funds have been laggards. As lower beta sectors such as consumer staples and health care have lead the broader market higher, materials names have under-performed perhaps foreshadowing imminent declines.

XLB is not the only materials ETF offender, either. As Benzinga noted on Monday, the SPDR S&P Metals & Mining ETF (NYSE: XME) is in serious technical trouble. That ETF is off another 1.5 percent today and has now lost more than 16.5 percent year-to-date.

With gold futures being hammered, the Market Vectors Gold Miners ETF (NYSE: GDX) and the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) are both off more than three percent. In further proof that traders hate gold mining stocks and reverse splits are a joke, the Direxion Daily Gold Miners 3X Bull Shares (NYSE: NUGT) is down nearly 11 percent today, the ETF’s first trading day after undergoing a four-for-one reverse split.

There is more bad news. The iShares Dow Jones US Basic Materials Index Fund (NYSE: IYM) is flirting with support in the $68.80 area. A break there probably takes the ETF back to $65-$66. If the Vanguard Materials ETF (NYSE: VAW) cannot hold $87, it likely returns to $82.

Another way of illustrating the dark clouds hanging over materials ETFs right now is this. Look at a heat map of inverse ETFs and exclude the ones that are trading on a post-split basis today. The noteworthy, legitimate gainer is the ProShares UltraShort Basic Materials (NYSE: SMN), which is close to staging a breakout of its own.

SMN is not the largest nor is it the most heavily traded inverse ETF out there. However, it is up nearly one percent on a day when the S&P 500 hit a new record high and that is not a good sign for long materials ETFs.

For more on materials ETFs, click here.

Related Articles

3 Gold Miners ETFs You Probably Don't Know About, But Should Get To Know

Gold is one of this year's best performing commodities and that's a theme that could extend as exchange traded fund demand swells and as central banks debase currencies. read more

New 3X Leveraged Gold Miners ETNs Begin Trading

The price of gold spot hit an all-time high in August 2020, as did the SPDR Gold Trust (NYSE: GLD). read more

New ETNs Bring Leverage, Spice To Gold Miners

Gold is hot this year and the miners are even hotter, a scenario bringing more light to the various leveraged exchange traded products that provide access to the companies extracting gold from the earth. read more

Should You Invest In Gold Right Now?

The price of gold is up 24.2% year-to-date in one of the most tumultuous years in history so far. With the possibility of a contested U.S. presidential election and a worsening pandemic in the coming weeks, things could become even more volatile on Wall Street, leading some investors to consider buying gold as a potential hedge against stock market weakness. read more