Going into the holiday shortened week, most U.S. equity index ETFs were in oversold territory. While the PowerShares QQQ Trust ETF ( QQQQ | Quote | Chart | News | PowerRating) continues to be oversold above its 200-day moving average, both the S&P 500 SPDRS ETF ( SPY | Quote | Chart | News | PowerRating) and Dow Diamonds ETF ( DIA | Quote | Chart | News | PowerRating) remain oversold below the 200-day moving average.
The same can be said for other equity index ETFs such as the iShares Russell 2000 ETF ( IWM | Quote | Chart | News | PowerRating).
This means that leveraged equity index ETFs are especially oversold to start the week. These include leveraged ETFs like the ProShares Ultra QQQ ETF ( QLD | Quote | Chart | News | PowerRating) as well as the Rydex 2x S&P 500 ETF ( RSU | Quote | Chart | News | PowerRating).
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Rallying into overbought territory below the 200-day moving average are a large number of inverse leveraged funds. Among the most overbought below the 200-day with 2-period RSIs in the 90s are the ProShares Short QQQ ETF ( PSQ | Quote | Chart | News | PowerRating) and the ProShares Ultra Short Dow 30 ETF ( DXD | Quote | Chart | News | PowerRating).
Internationally, many country funds that rallied above their 200-day moving averages in recent weeks have been pulling back toward their 200-day moving averages, becoming exceptionally oversold in the process. These ranks include Asian ETFs like the iShares MSCI South Korea Index ETF ( EWY | Quote | Chart | News | PowerRating) and the iShares FTSE/Xinhua China 25 ETF ( FXI | Quote | Chart | News | PowerRating), as well as ETFs from Latin America like the iShares MSCI Mexico Investable Market Index ETF ( EWW | Quote | Chart | News | PowerRating).
European ETFs like those representing equity markets in Germany and France are continuing to struggle to sustain recent closes above their 200-day moving averages.
On the sector front, while sectors like Basic Materials (see the Materials Select Sector SPDRS ETF ( XLB | Quote | Chart | News | PowerRating)) are pulling back to their 200-day moving averages, becoming extremely oversold in the process, other sectors remain vulnerable to overbought conditions below the 200-day. This includes both the energy and financial sectors - represented by ETFs like the Energy Select Sector SPDRS ETF ( XLE | Quote | Chart | News | PowerRating) and the Financial Select Sector SPDRS ETF ( XLF | Quote | Chart | News | PowerRating).
The sector hanging in the balance is technology. ETFs like the Semiconductor HOLDRS ( SMH | Quote | Chart | News | PowerRating) continue to trade near their 200-day moving averages, while short/inverse technology ETFs have begun to pullback from recent overbought conditions below the 200-day.
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David Penn is Editor in Chief at TradingMarkets.com.
