Are Traders Looking for Exits in These 3 Emerging Markets ETFs?

Does the bounce in emerging markets ETFs like the iShares MSCI Chile Index Fund ETF (ECH), the iShares MSCI All Peru Capped Index Fund ETF (EPU) and the iShares MSCI Thailand Investable Market Index Fund ETF (THD) mean that the bear market in the sector is over and the all-clear sign for the bulls been given?

After all, ECH and THD are both up more than 16% since the beginning of the month. EPU has gained more than 10% over the same time period.

Or is the current bounce merely short sellers covering their positions? This opinion suggests that the rallies in ECH and THD and EPU are not to be believed, and that significantly lower prices over an extended period are all but assured.

We have no idea whether or not the bear market in emerging markets is over, whether or not significant lower prices over an extended time will occur.

But what the data does show is that after these run-ups, emerging markets ETFs like these have a much higher likelihood of underperforming in the near term. And by waiting for the pullbacks, traders looking to buy these markets will likely have the opportunity to do so at prices lower than what sellers are currently asking.  Beyond that, the exceptionally overbought nature of all three of these emerging markets ETFs, means that traders and active investors should not be surprised if renewed short-selling is involved in taking exchange-traded funds like these lower in the near term – whether or not these ETFs again move significantly higher afterward.

All three ETFs in today’s report were pulled from ETF lists available through PowerRatings. To learn more, click here.

David Penn is Editor in Chief of