SPDR S&P 500 ETF (NYSEArca: SPY) is knocking on the door of its all-time high and the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) was up 10 days in a row heading into Friday. However, China ETFs falling to their lows for the year could be sending an overlooked warning signal on the strength of the global economy.
The iShares FTSE China 25 (NYSEArca: FXI) was on track for a 4% weekly decline in afternoon trading Friday.
The Chinese ETF dropped below its 200-day exponential moving average on Friday. [Should You Listen to Copper ETF’s Warning?]
“China’s stock market tumbled to three-month lows this week on worries the government will do more to control property price increases and economic data showed economic recovery in the world’s second-largest country losing steam,” reports Trang Ho at Investor’s Business Daily.
FXI is down about 7% year to date. [China ETFs Tumble on Home-Price Curbs]
Turning back to the major U.S. stock indices, the S&P 500 was on track for a weekly gain of 0.6%, the Dow added 0.7% and the Nasdaq Composite climbed 0.3%. All three benchmarks were slightly in the red for the session on Friday afternoon.
“I don’t think that one or two days’ movement is really going to change the underlying momentum of this market, which I still think is pretty strong at this point,” said Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors, in a Reuters report.
“When you get such a strong run and you couple that with it being at historical levels, then buyers are a little bit more wary of jumping in,” added Wayne Lin, fund manager at Legg Mason, in a Bloomberg article. “Equities are fairly valued, but we’ve had a very strong run and there is a question out there as to what’s going on more fundamentally.”
The top three unleveraged ETFs this week were iPath Cotton (NYSEArca: BAL), U.S. Natural Gas (NYSEArca: UNG) and Market Vectors Junior Gold Miners (NYSEArca: GDXJ) with gains of at least 5%.
The bottom three unleveraged ETFs this week were Guggenheim Global Solar Energy (NYSEArca: TAN), Guggenheim China Real Estate (NYSEArca: TAO) and Guggenheim China Small Cap (NYSEArca: HAO) with setbacks of over 5%.
In next week’s economic reports, look for housing data on homebuilder confidence, housing starts and existing home sales. Markets will also get the Federal Reserve announcement on Wednesday, followed by a press conference with Ben Bernanke.
iShares China FTSE China 25
Full disclosure: Tom Lydon’s clients own SPY.
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