Heading into trading on Friday, there is no more oversold group of exchange-traded funds than the bond ETFs. Whether you are looking at the iShares Barclays Aggregate Bond Fund ETF (NYSE: AGG) or the inflation-protected, iShares Barclays TIPS Bond Fund ETF (NYSE: TIP), the fact of the matter is that these funds have been selling off sharply over the past few days, and could represent potential opportunity for short-term traders and more active investors.
The iShares Barclays Aggregate Bond Fund ETF, for example, has closed lower for three days in a row, and is now technically oversold above the 200-day moving average. The pullback in AGG has taken the fund to new, one-week lows, and to the lower end of a relatively volatile trading range that arguably extends back to the beginning of the year.
With a short-term positive edge of 1%, AGG was last in oversold territory a little over a week ago. Then, a four-day sell-off in AGG resulted in an even more powerful four-day rally. The current selling in AGG represents at least in part some profit-taking from this short-term move toward long-term highs.
Much the same can be said of the Vanguard Total Bond Market ETF (NYSE: BND). Down three in a row and taking a positive, short-term edge of just over half a percent into Friday’s trading, shares of BND have retreated to technically oversold territory, and may become attractive to short-term traders looking to buy weakness in markets, like BND, that are still trading in bull market territory.
The iShares Barclays TIPS Bond Fund has only closed lower for two days in a row, but this selling has been more than a enough to drag the ETF into technically oversold territory as of Thursday’s close. Trading in a range for nearly a month, TIP will need to fall further before it truly breaks down from that range and starts setting major new lows.
That said, of all the bond ETFs in today’s report, it is the TIP that has the biggest positive edge in the short-term heading into trading on Friday, notching an edge of nearly one and a quarter percent.
David Penn is Editor in Chief of TradingMarkets.com