Market Overview

The Emerging Markets ETF That's Outperforming Its Peers

The Emerging Markets ETF That's Outperforming Its Peers

After a weak 2015, emerging markets assets, broadly speaking, delivered resurgent performances last year. This is especially true since Trump's victory on November 8. Since election, major emerging market ETFs are all up around 4 percent, compared to the S&P 500's 10 percent rally.

However, one emerging market ETF is actually outperforming the market during this time: theDirexion Daily Emerging Markets Bull 3X Shares (NYSE: EDC).

As its name implies, EDC is a triple-leveraged ETF, meaning this is an instrument to be used on a tactical basis by active traders looking for potentially large intraday gains. EDC is not intended to be held overnight or for weeks at a time.

“Leveraged and inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage," according to Direxion. "They seek daily goals and should not be expected to track the underlying index over periods longer than one day."

EDC attempts to deliver triple the daily performance of the widely followed MSCI Emerging Markets Index. The ETF has a bearish counterpart, the Direxion Daily Emerging Markets Bear 3X Shares (NYSE: EDZ), which looks to deliver triple the daily inverse performance of the MSCI Emerging Markets Index.

Both ETFs are heavily weighted in Asia—about 50 percent of their weightings are in China, South Korea, and Taiwan. As of this writing, the only holding in the fund with at least a 4 percent weighting is SAMSUNG ELECTRONIC (OTCMKTS:SSNLF). 

The Near-Term Outlook

Several key technical indicators show that the move in EDC may not be over. For one, EDC is currently trading around $72. If it were to break through $73, and there doesn't appear to be significant resistance until the $90 level. Notably, the 7-day moving average has crossed other significant moving averages, including 50-day and 200-day. This indicates a bullish uptrend.

It should also be noted that the 20-day Relative Strength Index, or RSI, is currently at 70.27 percent. Anything above 50 percent is considered bullish. RSI is a lagging indicator, meaning it's more useful for confirming a trend. This strong number seems to be doing exactly that. 


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