ETFs to Track Market Sentiment

August 5th at 6:29am by Tom Lydon

In the current volatile market, investors can monitor certain ETFs to get a feel for market sentiment and appetite for risk.

“The U.S. stock market continues to toy with investor’s emotions, oscillating between rising, stalling, and falling on a seemingly weekly basis,” Joel Wenger for Investor’s Business Daily wrote.

Previously, market analysts were contemplating a steady turnaround in the stock market, as some stocks and ETFs gained ground. Various sectors and areas of the market are used as an indicator of economic growth because they are influenced by real demand and investor sentiment, reports Trang Ho for IBD. [ Transportation ETF Forecasts Better Times for Stocks]

The following 5 ETFs can be used to gauge market sentiment and health of the U.S. stock market:

  • iPath Dow Jones-UBS Copper ETN (NYSEArca: JJC“Dr. Copper” is the key for industrial growth and demand. The metal has been flat most of the year, despite the S&P 500 growth of 11%. JJC is currently 20%under its 52-week high. [Copper ETFs Slump on China Slowdown Fears]
  • iShares Dow Jones Transportation Average (NYSEArca: IYTThe ETF tracks railroads, the trucking industry and airlines, making it the barometer of business health and activity. The fund is up 2.89% year-to-date.
  • iShares Russell 2000 Index (NYSEArca: IWMSmall-caps historically tend to lead the economy out of a recession, indicating investor risk appetite is healthy. The lack of performance and interest in small-caps  is indicative that investors are not banking on much growth. [Investors Moved Back to Stock ETFs in July]
  • iShares Barclay 20+ Year Treasury Bond (NYSEArca: TLT) Investors are piling into bonds and not stocks. Bonds move opposite of stocks. In 2012, TLT gained 38.5% as investors shied away from risk.
  • iShares MSCI Germany Index (NYSEArca: EWGThe country is at the mercy of Italy, Spain and Greece. The fund is in a downtrend since early 2011, and is trading under its 200 day-moving-average. As Europe’s largest economy, Moody’s downgraded Germany from neutral to negative. [After the DownGrade: German Stocks or Bonds?]

Tisha Guerrero contributed to this article. 

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.