ETF Trading with Ultimate PowerRatings: 5 ETFs for the Next 5 Days (FAS, ERX, SRS, XLI, EWD) and a SPY Update
As it did on Thursday, the ^SPY^ opened lower and closed higher on Monday. In and of itself, this may be a bullish sign. But the fact that the SPY – along with the ^IWM^ – continues to trade below its 200-day moving average should probably encourage more than the usual measure of caution for the time being.
This indecisive trading in both the SPY and the IWM has resulted in neutral ETF PowerRatings of 5. The ^QQQQ^, which outperformed both the SPY and the IWM on Monday, earned an ETF PowerRating of 6.
Let’s take a look at 5 ETFs for the Next 5 Days.
The past four trading days have seen the Direxion Financial Bull 3x Shares earn ETF PowerRatings of 9 each session.
The last time FAS earned an ETF PowerRating of 9 or higher was early in July, after falling from just over $25 to just north of $18.
Within five days of earning its ETF PowerRating upgrade to 9, FAS climbed more than 21%.
Also earning four consecutive ETF PowerRatings of 9 is the Direxion Energy Bull 3x Shares.
The current pullback in ERX comes after the ETF earned our lowest ETF PowerRating of 1 on August 5th. Note that our research indicates that ETFs that earn ETF PowerRatings downgrades to 1 have made significant short term gains less than 25% of the time.
As such, the retreat in ERX was little surprise to PowerRatings traders, who would have recognized in the fund’s 1 rating a warning to “consider avoiding” the ETF (or “consider selling short”).
Traders looking for ETF markets that may be vulnerable to reversal to the downside – as ERX was back at the beginning of the month – may want to consider an exchange-traded fund like the ProShares UltraShort Real Estate ETF.
SRS has earned our lowest ETF PowerRating of 1. Downgrades to 1 in this ETF have often served as excellent signals for short term traders looking to sell low-rated ETFs short. For SRS, these previous opportunities developed in both late May and early July of this year.
Pulling back to within mere cents of its 200-day moving average, the Industrial Select Sector SPDR Fund is one of the highest rated, non-leveraged ETFs in our database.
Shares of XLI have closed with ETF PowerRatings of 10 for the past three consecutive trading days. These are the highest ETF PowerRatings for XLI since late May.
No list of ETFs for the Next 5 Days would be complete without a country fund, and fortunately the iShares MSCI Sweden Index Fund ETF provides short term traders with a potential opportunity in a top-rated, Europe-based country fund.
One interesting note about EWD: EWD closed higher by more than 2% on Monday, yet ended the day with an ETF PowerRating of 9.
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David Penn is Editor in Chief at TradingMarkets.com.