Things look to be getting interesting, as it appears that investors are beginning to rotate into some of the other beaten up global equity ETFs, at least on a near-term basis.
Some absolute price improvements can be noted, but relative to the S&P 500, the downtrends that began in January 2013 look to be ending. Although this is suggesting some kind of stabilization, it may be a bit premature to call for a sustainable reversal at this point. So far, the most notable appears to be occurring with the iShares MSCI EAFA Index ETF (EFA).
In this instance, the outperformance may be able to sustain for the next several weeks to months. On the other end of the spectrum, the iShares FTSE China Large-Cap ETF (FXI) is just beginning to show signs of basing, which is a healthy start.
SPDR S&P 500 ETF (SPY): A small head and shoulders top pattern has been forming since Mar. 2013. By no means does this have the makings of a major trend reversal, but it does indicate that distribution forces and/or profit taking are in the works. By the looks of the pattern the right shoulder(s) needs developing and may take another month to do so. The level on the downside to watch will be the neckline support near 153-153.50 as this corresponds to the Feb. 2013 high, the Mar. 2013 breakout, and the Mar/Apr. 2013 lows. A violation of support opens the door for a move to the Feb. 2013 low (149).
PowerShares QQQ (QQQ): Relatively speaking (vs. the S&P 500), QQQ could be exhibiting signs of some kind of near-term stabilization as evident by the break above the steep Sep. 2012 downtrend. From a price perspective the risk/reward profile is still fairly neutral as QQQ trades near the middle of its Nov. 2012 uptrend channel. The Apr. 2013 and Sep. 2012 highs of 70.17/70.58, respectively, represent initial resistance. The top of the channel closer to 71.50 is secondary resistance. Initial support near 67.50 corresponds to the bottom of the uptrend channel.
Next page: International ETF technical analysis
iShares FTSE China Large-Cap ETF (FXI): There is technical evidence to suggest that FXI may be in the process of a healthy basing effort. For example, FXI is now trading above the top of its Feb. 2013 downtrend channel and it has also broken out of the steep Feb. 2013 relative strength downtrend. A couple of things can now occur to further stabilize the selling: one would be a successful test of the Apr. 2013 low (34.50) and the other would be a move above initial resistance near 37-38 or where a convergence of daily/weekly/month moving averages reside.
iShares MSCI Emerging Market ETF (EEM): There are a couple of things that are showing up on the weekly chart shown that need to be monitored carefully. The first is the technical death cross that has recently developed as the 10-week moving average has crossed below the 30-week moving average. On a stand-alone basis, this is a bearish technical sell signal. The other is this large ascending triangle pattern as EEM recently tested the bottom of the pattern. A violation of support near 40-41 confirms a breakdown and would likely result in a more cautious outlook.
iShares MSCI EAFE ETF (EFA): A Jul. 2012 uptrend channel and the Jan. 2013 ascending triangle breakout are pointing to higher prices in the near-term. However, a violation of the bottom of the channel, currently near 58.50 could alter the bullish outlook. The Jan. 2013 breakout level, closer to 56 provides secondary support. To the upside, initial resistance looks to reside near the Apr. 2013 high (60.84). A move above this supply resolves the sideways trading that has been ongoing this year and allows for a test of the 2011 high (64.35). Relative to SPX, EFA looks to be breaking out from its Dec.
The chart below shows the relative performance of EFA versus the S&P 500.
J. Beck Investments is an independent provider of technical research for ETFs.