On Wednesday, the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) lost 1.8% on above average volume, extending its year-to-date loss to 9.5%, or nearly 300 basis points worse than the iShares Latin American 40 ETF (NYSEArca: ILF).

From a fundamental perspective, EWW arguably should not be behaving this poorly and lagging ILF and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) by such wide margins. Earlier this month, Moody’s Investors Service raised Mexico’s credit rating to A3, or upper medium investment grade and one rung higher than at Fitch Ratings and Standard & Poor’s, but since Feb. 5, EWW is off nearly 5%. [South of the Border Slide for Mexico ETF]

Additionally, Mexico is one of the largest silver producers in the world. EWW has a nearly 18% weight to materials stocks, but the ETF has tumbled even as silver futures have surged this year. [Silver ETFs Soar]

While Mexico’s fundamentals are not terrible, EWW has been jaundiced by negative sentiment toward emerging markets, Latin American fare in particular. Compounding the $2.49 billion ETF’s woes is a rapidly deteriorating technical picture.

“Structurally we know that we don’t want to be long Latin America and we don’t want to be long Mexico. But what about in the short-term? Here is what’s currently happening in Mexico. I see a decisive break of an important uptrend line off the 2011 lows. When markets are breaking big uptrend lines, I can’t take that as a bullish sign (especially as S&Ps here in the US are making all-time highs),” notes Eagle Bay Capital President J.C. Parets.

Earlier this month, Parets highlighted EWW’s worsening relative strength against the S&P 500. That scenario is important to remember for those considering EWW from the long side because some market participants believe Mexican stocks are correlated to U.S. equities. That was not the case last year as EWW finished slightly lower as the S&P 500 soared, providing investors with clues that EWW was damaged. [No Gusta on The Mexico ETF]