Trading By the Numbers: 3 Funds from Emerging America

You don’t have to take my word for it that the “risk-on” trade is back. One look at the recent performance of exchange-traded funds linked to emerging markets is all you need to know that the hunt for high performing markets is on.

This is true not just of exchange-traded funds representing nations like China and Brazil, either. The iShares S&P Latin America 40 Index Fund ETF (ILF), for example, includes stocks from countries from BRIC member Brazil, to be sure. But also included in the mix are stocks from exchanges in Chile, Mexico and Argentina, as well.

And as for the ILF, the fund has been on a tear, closing higher for five out of the past six trading days, including three in a row, and finishing in overbought territory for four out of the past five sessions.

Sooner or later, sellers will return to the market for ILF shares. And the higher the fund climbs and the longer it goes without sellers entering the market, the more sharp and severe the inevitable correction is likely to be.

To this end, traders looking to take advantage of the potential for a near-term reversal in the ILF may want to keep an eye on the inverse ETF that tracks the same nations: the Direxion Daily Latin America Bear 3x Shares (LHB). Leveraged three-to-one to the inverse of the S&P Latin America 40 Index, LHB dropped by more than 2% on Friday to finish at its most oversold in nearly two months.

Note that LHB is among our highest rated ETFs heading into trading on Monday, earning a “9 out of 10” rating as of Friday’s close.

Traders who want more direct exposure to the individual countries can do that – and leveraged funds are available in many instances. The ProShares UltraShort MSCI Brazil ETF (BZQ) is designed to track twice the inverse of the MSCI Brazil Index, and has pulled back to its lowest closing level since July.

Like LHB, BZQ is one of the highest rated funds in our database as of Friday’s close. The ETF has finished lower for three days in a row and was down by more than 4% on its pullback on Friday.

The ETFs in today’s report were drawn from the data and research available through PowerRatings. To find out more, click here.

David Penn is Editor in Chief of