Select materials stocks and exchange traded funds have not fallen over the past month with the Materials Select Sector SPDR (NYSEArca: XLB) down 2%.
Apparently, the Market Vectors Steel ETF (NYSEArca: SLX) did not get the memo about materials sector weakness and it is familiar emerging market, Brazil, that is helping bolster the $110.5 million SLX. SLX has joined Brazil ETFs and those funds heavy on Latin America’s largest economy in rallying in recent weeks as the steel ETF has surged almost 7% in the past month. [Brazil ETFs Survive Ratings Downgrade]
After the move to the upside, SLX’s technical condition is worth evaluating.
“SLX has been in a downtrend since early 2011, when it traded as high as $77.41. In early March of 2014 it bounced off $42.99 and has begun a move to the upside, currently trading near $47.70. It has recently moved above it short term moving averages and is about to see its 20D-SMA cross above its 50D-SMA. This move has left its RSI just below 70 and nearing an over-bought condition,” said Street One Financial Market Technician Dave Chojnacki to ETF Trends.
In terms of fundamentals, the Brazilian bounce has been meaningful for SLX. Brazil-based Vale (NYSE: VALE), the world’s largest iron ore maker, is the ETF’s largest holding at 14.6% and two other Brazilian stocks are found in the fund’s top-10 holdings. Shares of Vale are up 15.5% in the past month. With an allocation of 22.7%, Brazil is SLX’s second-largest country weight behind the 35.4% the ETF devotes to the U.S. [Investors Return to Emerging Markets ETFs]
Emerging markets exposure has recently been rewarding, but special attention should be paid to SLX’s chart and near-term price action.