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.