The Third Quarter's Top ETFs

10/11/2012 9:50 am EST

Focus: ETFs

Thomas Aspray

, Professional Trader & Analyst

A examination of Barron’s recent Mutual Fund Report highlights a few little-known ETFs that MoneyShow’s Tom Aspray thinks should be monitored closely in the coming weeks.

Three days of solid selling has taken the S&P 500 back to the late September low of 1,430.53. The next major zone of support is at 1,422 to 1,426, which corresponds to the late August as well as the early April highs.

The Spyder Trust (SPY) is now 2.7% below its September highs, which is typical of a pullback in an uptrend. SPY was up 5.8% in the third quarter.

The Lipper Mutual Fund Quarterly from Barron’s October 8 issue reveals that the 7,857 US diversified stock funds were up 5.29%. In the US, large-cap growth did the best (up 6.28%), while world markets did well as world equity funds gained 6.63%.

Anyone with a 401(k) who invests in mutual funds should take a look at how their funds did, as it could help them determine whether they should be moving in or out of any of them. Relative performance analysis is a tool that I use to help determine which funds I am buying or selling.

I always find the Leaders & Laggards table quite interesting, as it sometimes contains ETFs and funds that I do not normally follow. Last quarter, one of the top performing non-leveraged ETF was Global X Silver Miners (SIL), which was up 33.5%.

A technical examination of this ETF as well as three other top performers can give traders and investors good ideas for future investments, and there are some key support levels you should be watching.

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Chart Analysis: The Market Vectors Egypt Index (EGPT) is a $57.5 million ETF with an average volume of 72,000 and a 1.8% yield. It was up 25.7% for the third quarter, but has had a volatile history, as it dropped over 50% in 2011.

  • The weekly chart shows that the September high of $15.99 was just below the weekly downtrend (line a), which is now at $16.46.

  • EGYP did test the 50% Fibonacci retracement resistance level from the 2010 high of $22.42.

  • The pullback is so far holding above the support from the March 2012 high at $14.41 (line b).

  • There is stronger chart and retracement support now in the $12.60 to $13.20 area.

  • The weekly relative performance moved through key resistance (line d) in early September, and is holding above its WMA.

  • The weekly OBV moved through its downtrend (line e) and its WMA in mid-August, when EGPT was trading around $13.22.

  • A move above the short-term resistance at $15.55 would be a sign that the correction is already over. The daily analysis (not shown) is still clearly positive.

Another top performer was Market Vectors Biotech (BBH), which is a $132.3 million ETF with an average volume of 31,000 that was up 14.7% in the third quarter. Its largest holding is Amgen (AMGN), which makes up over 15% of BBH.

  • The weekly chart shows that BBH may reverse this week by closing below last week’s low at $54.38.

  • BBH came within 1% of its weekly Starc+ band last week (see arrow), with next support in the $53 area.

  • There is more important support at $51.60 and the August 2012 high, while the uptrend (line f) is at $49.

  • The weekly relative performance shows a pattern of higher highs (line g), as it has confirmed the price action. It is well above its rising WMA

  • The OBV has also confirmed the price action, but is slightly overextended, as it is well above its rising WMA and the uptrend (line h).

  • The daily analysis (not shown) is positive, and does not show any signs yet of a top.

NEXT: Key Levels for 2 More High-Flying ETFs


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Another top performer is the iShares MSCI New Zealand Market Index (ENZL), a $109 million ETF with an average volume of 40,000 that was up 16.1% in the third quarter. Its top ten holdings make up over 70% of the ETF, with two holdings that are over 15%.

  • The long-term resistance from 2011 in the $34.45 area (line a) was tested last week.

  • There is minor support now at $33, with further levels in the $31.60 to $32 area (line b) and the rising 20-week EMA

  • The relative performance completed its bottom formation (line d) in September, when resistance (line c) was overcome. The RS line is still rising and is well above its WMA.

  • The on-balance volume (OBV) broke through major resistance in August (line e), and has risen sharply.

  • On a weekly breakout to new highs, the next upside targets are in the $40 to $42 area.

The Global X Silver Miners (SIL) is a $365 million ETF with an average volume of 383,000 that was up 33.5% in the third quarter. It has 35 stocks, with Silver Wheaton (SLW) making up over 13%.

  • The daily chart shows a broad trading range (lines f and g) over the past month.

  • There is resistance now at $25.50 to $26, with support at $23.

  • The 38.2% Fibonacci retracement support from the September high ($27.78) is at $22.36, with the 50% support at $21.30.

  • The daily OBV broke through its well-defined downtrend (line h) in early September.

  • Volume was heavy in September, but the OBV has now dropped back below its WMA.

  • The OBV did confirm the recent highs, so the recent trading range is likely to be resolved to the upside, with long-term resistance at $29.

What it Means: Three of these four ETFs trade at quite low volumes, which reinforces the importance of limit orders.

The most liquid is the Global X Silver Miners (SIL), which does not show signs yet of significant top. Nimble traders should be watching for a drop to the 38.2% support for an opportunity to buy, while investors need to wait for a more meaningful correction in the coming months.

Both Market Vectors Egypt Index (EGPT) and iShares MSCI New Zealand Market Index (ENZL) need to correct another 5% or so before they reach reasonable risk-reward levels. EGPT could have already seen its correction, and may be ready to overcome its longer-term resistance.

The long-term relative performance analysis of biotechnology is positive, as our holding in iShares Nasdaq Biotechnology (IBB) is up over 20% since it was recommended in May (click here to see the current Charts in Play Portfolio). The further correction in the Market Vectors Biotech (BBH) over the next week or two should create good buying opportunity.

How to Profit: No new recommendation for now

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