The folks at Bespoke Investment Group have been kind enough to provide a list this week of the most oversold exchange traded funds measured by distance from the 50-day moving averages.
Ever since S&P announced its downgrade on U.S. debt, followed by growing concern over the Eurozone, more and more negative news has been in the headlines, sending global markets and stock ETFs into a steep decline.
According to the Bespoke ETF analysis, around 85% of 200 key ETFs are trading below their 50-day moving averages, with around 18% of the 200 trading more than 15% under their 50-day moving averages.
The top underperformers include ETFs that cover real estate, financials and Europe.
Topping Bespoke’s list is SPDR S&P Homebuilders ETF (NYSEArca: XHB). XHB has plunged 22.37% year-to-date and is down 20.14% from its 50-day MA on poor economic and housing data. David Blitzer, chairman of the Index Committee at S&P Indices, has noted that the data supports a “bounce-along-the-bottom” outlook on housing. “We might have a long way to go before we see a real recovery,” Blitzer added. [Builder ETFs in Focus on Pending Home Sales]
- Market Vectors Steel Index ETF Fund (NYSEArca: SLX). SLX has plummeted 29.20% year-to-date and is down 19.89% from its 50-day MA.
- iShares MSCI Germany Index Fund (NYSEarca: EWG). EWG fell 15.37% year-to-date and is down 19.25% from its 50-day MA. Gross domestic product rose by only 0.1% in the second quarter as first-quarter figures were revised lower. The surprisingly weak report from the Europe’s biggest economy shook global markets. [Germany ETF Falls 3% After Weak GDP]
- SPDR KBW Bank ETF (NYSEArca: KBE). KBE has fallen 29.29% year-to-date and is down 18.82% from its 50-day moving average. Fiscal tightening and incoming data on the poor state of the economy has helped pressure the financial sector. [Banks Weigh on Financial Sector ETFs]
- iShares MSCI Italy Index Fund (EWI). EWI has dropped 20.21% year-to-date and is down 18.01% from its 50-day moving average. The seemingly never-ending financial problems plaguing Europe’s banks have spread to peripheral states. More recently, Italy has been feeling the heat as the debt contagion spreads. [Italy ETF Feeling Heat of Debt Crisis]
While these funds may look very downtrodden, the contrarian investor may look at these funds and see a buying opportunity. Our investment approach includes using moving averages to reduce portfolio risk and spot opportunities. [ETF Trend Following Plan.]
SPDR S&P Homebuilders ETF
Max Chen 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.