5 ETFs for the Next 5 Days: Sellers Return to Gold, Retail

For a second time this month, gold-based exchange-traded funds look likely to head lower over the next few days.

Both the SPDR Gold Trust (GLD) and the iShares COMEX Gold Trust ETF (IAU) pulled back to finish in oversold territory on Wednesday. And having pulled back this far, additional selling will put these funds at levels where they have historically attracted significant short-term buying. As hinted at above, both GLD and IAU made brief, three-day pullbacks two weeks ago, corrections that took the ETFs into oversold territory. In both instances, the ETFs rallied sharply afterwards, gaining more than 1% in a single session.

It’s worth noting that commodity-based exchange-traded funds have a stronger tendency to trend relative to equity-based ETFs. Because of this, ETFs like GLD and IAU are more likely to experience of drops that are sharper and longer-lasting than those of equity-based funds like the SPDR S&P Retail ETF (XRT) or even the Market Vectors Gold Miners ETF (GDX), which tracks the share values of gold mining companies rather than the bullion price of gold.

Speaking of XRT, retail funds have also begun to pullback toward levels where buyers have stepped in to take advantage of short term weakness. Finishing at its lowest levels of the week and oversold, XRT pulled back by more than 2% ahead of trading on Thursday. Also oversold heading into Thursday’s session is the Retail HOLDRS ETF (RTH). RTH has closed lower for three days in a row after dropping by more than 1% on Wednesday.

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David Penn is Editor in Chief of TradingMarkets.com