Going into trading on Tuesday, some of the highest rated exchange-traded funds belong to two groups – gold and technology. In today’s report we’ll look at a pair of leveraged gold ETFs, as well as a set of technology-related funds that traders may want to keep their eyes on over the next few days.
First a quick overview of the PowerRatings in the ETF market. Among the top exchange-traded funds by volume, the ^SPY^ has ETF PowerRatings of 5, while the ^QQQQ^ had earned ETF PowerRatings of 4. These are relatively neutral readings for these two major ETFs, though additional strength in the QQQQ could encourage a downgrade in that ETF.
The highest rated ETFs in our Top 10 are ^IWM^ and the ^EFA^. Both IWM and EFA have ETF PowerRatings of 6.
Here are 5 ETFs for the Next 5 Days.
Among leveraged ETFs, two have earned our highest PowerRatings ahead of trading on Tuesday. These ETFs are the ^GLL^ and the ^DZZ^ (below).
Both GLL and DZZ have earned top ratings of 10 for the past two days, top ratings earned after spending three days with PowerRatings of 9. Note that leveraged ETFs that earn our highest PowerRatings of 10 have made significant short term gains more than 78% of the time in our historical testing.
I mentioned technology stocks at the beginning of this report. Continued strength in technology stocks has meant that exchange-traded funds that are inverse leveraged to this sector have been moving lower, becoming more oversold and earning significant PowerRatings increases.
At the top of this list are two inverse leveraged funds: the ^TYP^, which is leveraged 3 to 1, and the ^REW^ (below), which is leveraged 2 to 1.
As ETFs that have earned PowerRatings of 9, TYP and REW belong to that category of ETF that has made significant short-term gains more than 74% of the time. As such, they are among the funds that are the most sought after by short term traders looking to take advantage of the historical edges uncovered by our research into ETF behavior going back to 2003 in the case of leveraged funds, and more than a decade in non-leveraged ETFs.
Last, I wanted to highlight one of those non-leveraged ETFs – also related to the technology sector: the ^XLK^ (below).
XLK has earned our lowest PowerRatings over the past two days, being downgraded to 1 from 3. This means that the fund has advanced to levels from which it has historically tended to reverse and move lower – again, based on our quantified backtesting into XLK and hundreds of other exchange-traded funds.
What is interesting about ETFs that earn PowerRatings of 1 is that they are as likely to reverse to the downside as our highest rated ETFs are likely to reverse and move to the upside. Based on our testing, for example, 1-rated ETFs have made significant short term gains approximately 22% of the time. This means that 78% of the time, 1-rated stocks have lost money. This makes ETFs that are downgraded to 1 among the worst funds for traders to buy on a short term basis, but among the best ETFs for traders looking to sell short.
Isn’t it time you gave ETF PowerRatings a try? Our top-rated ETFs have been correct nearly 80% of the time since 2003. Click here to launch your free, 7-day trial to our ETF PowerRatings today!
David Penn is Editor in Chief at TradingMarkets.com.