Four ETFs Celebrating A Merry Santa Claus Rally

December 08, 2008

 

1) The iShares FTSE/Xinhua China 25 Index (NYSE: FXI). It trades about 51 million shares per day. That's much more liquid than the SPDR S&P China ETF (NYSE: GXC) and the PowerShares Golden Dragon Halter USX China Portfolio (NYSE: PGJ). The SPDR only trades around 60,000 shares per day and PGJ trades around 250,000 shares per day. There's nothing wrong with either GXC or PGJ. It's just that as a portfolio manager, I'm buying for a lot of clients with large portfolios. So liquidity is a key concern in getting the best pricing. For individuals, it would be fine to go with GXC and PGJ. It's really a matter of personal taste.

Technically, FXI staged a breakout on Monday above $28 a share. That's where the ETF's price had been running up against resistance lately. Since early November, FXI hasn't been able to break that level on six different occasions.   

So why aren't we buying it yet? The problem is that its intraday low Monday was $29.58 per share. That's almost 6% above its breakout point of $28 per share. The fact that FXI closed even higher at $30.25 leaves us concerned we're chasing an ETF that may have moved too quickly. We're going to watch FXI closely over the next several days to see how it performs, and possibly open positions in China. We'd like to see the $28 pricing level hold and a clear base to form before buying FXI. In other words, we really don't want to see this ETF's price run up much more.

2) The iShares MSCI Hong Kong Index (NYSE: EWH). It has moved above its 50-day moving average of $10.60, closing at $10.75 on Monday. EWH's first resistance should come around $11.20 per share, based on previous highs in early November and late October. So if we can see a breakout, that would give us more confidence that this Hong Kong ETF is ready to assume leadership in overseas markets.

3) The SPDR S&P 500 ETF (AMEX: SPY). There's a possibility that over the last month, SPY has formed an inverted head-and-shoulders technical pattern. That would indicate an extremely bullish break to the upside. It would give us a chance at a 15% rally from here if this rebound can gain some legs. But we're not convinced yet of such a breakout. But we're very, very close. Patience at this point is a virtue. On SPY, we'd need to see a move to $94 per share. It closed at $91 on Monday.


Jerry Slusiewicz is president of Pacific Financial Planners in Newport Beach, Calif., and his columns appear regularly on IndexUniverse.com. He can be reached at:

[email protected]

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