With the stock market up three days in a row, traders should begin keeping an eye on potentially overbought markets that could be among the first to pullback when traders shift from an emphasis on buying to an emphasis on selling.
Only bond funds are trading in oversold territory heading into the final trading day of the week. As such, today’s 7 ETFs You Need to Know focuses on some of the funds that have moved in the opposite direction, rallying toward levels from which they have historically reversed and moved lower in the short term.
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Here are 7 ETFs You Need to Know for Friday.
Reflecting the recent investor preference for safety stocks, the most overbought fund in our database is the ^XLP^.
Shares of XLP have closed higher for four days in a row, five out of the past six, and has spent most of the past week in overbought territory above the 200-day moving average.
A number of country funds have also become very overbought above the 200-day. These include the ^EWQ^ and the EWH^ (below).
EWH has gained for the past two days in a row. With both closes in overbought territory, EWH’s rally comes in the wake of a three-day pullback.
Bets against the U.S. dollar are once again becoming crowded, with both the ^GDX^ and the ^UDN^ (below) closing in overbought territory ahead of trading on Friday.
Up four days in a row, UDN has closed in overbought territory for the past two sessions.
Of the major U.S. equity index exchange-traded funds, the most overbought is the ^SPY^.
Trading just outside of oversold territory above the 200-day moving average is the ^PPH^ (below).
Shares of PPH have been rangebound for the past five days, with Thursday’s selling help bring the fund down to the lowermost edge of that range. Any significant selling today on Friday is likely to find PPH in oversold territory.
David Penn is Editor in Chief of TradingMarkets.com