Emerging market exchange traded funds (ETFs) have, in recent weeks, seen a fairly painful correction. Here’s why you should be looking at the ones that were hit the hardest. Say what?
India is a perfect example of a market that has been hit hard in the last few weeks. One of the most beaten-down funds has been Market Vector India Small-Cap (NYSEArca: SCIF). Check out this drop from the high to the low:
Ordinary instinct may tell you to stay far away from a fund that’s 18% below its 200-day moving average, and right now, this wouldn’t be considered a buying opportunity according to the trend following strategy we use.
But the fact is that the areas that have been hit the hardest in this correction are best positioned to rebound the most.
The best time to buy is when a position like this hits its 200-day, because it’s a signal that a long-term uptrend may be in place.
You simply can’t count out emerging markets and the long-term growth story is still very much in play. Although there’s more risk involved, they’ve got far better GDP than developed nations, low levels of debt and growing middle classes that are spending more and more of their hard-earned cash.
When you consider getting into these markets, look for the ones that really got hit this time. By going to the ETF Analyzer, you can sort funds by their 200-day moving averages to see which ones have been hit the most.
If you’re a premium member, you can take it a step further and set up trading alerts for the ETFs you’re interested in owning when they’re back in action.
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.