From the desk of Tom Bruni @BruniCharting
Last night I was working on an International and Fixed Income ETF Report that went out to our Institutional Clients, but I wanted to highlight an important theme that I saw during my analysis.
Let’s take a look at the MSCI EAFE Index ETF, which has retraced a bit more than 38.2% of its 2018 decline and momentum has gotten overbought. Despite the improvements, price remains below a downward-sloping 200-day moving average, downtrend line from their ’18 highs, and momentum is diverging negatively.
Click on chart to enlarge view.
Prices have stalled out just above support near 64 and their resolution from this range will tell us a lot about the next directional (or rangebound) move.
The theme I’m seeing across the space is many of these diversified and country-specific International Equity ETFs running into confluences of resistance where it would be very logical for sellers to step in.
…but they’ve not done so yet.
Whether these correct through time and then break out or see downside continuation will be very important from an information perspective and will likely offer some good reward/risk opportunities as well.
My main point here is that it’s very tough to be long these ETFs at current levels, so if you wanted to take a shot on short side your risk is as well-defined as it has been over the last two to three months.
The next few weeks will be very important and I for one am excited to see how these pan out. For now, a neutral/bearish approach appears best.
Shorts, if you’re out there…here’s your fat pitch.
If you’re an institution and want access to the report mentioned at the top of the post, reach out to Jon Bloom, our Head of Institutional Sales.
Thanks for reading and let us know if you have any questions!