ETF Watchlist for March 4, 2014

db X-Trackers Harvest CSI 300 China A-Shares (ASHR)

Last week we looked at this and several other Chinese ETFs in the wake of financial turbulence in the real estate and trust sectors. The Ukraine pushed China off the front page and out of the forefront of investors’ minds, but the situation hasn’t changed. Manufacturing data still shows a contraction, while services remain strong. Since manufacturing is the leading indicator, there is risk that services will weaken in the coming months (assuming there isn’t a manufacturing rebound in the works).

Last week the Chinese yuan continued to devalue, but the Chinese stock market did not sell-off. If the yuan continued to depreciate, even though that is bullish for stocks in the long-run, the immediate impact would be fear and volatility.

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United States Oil (USO)

Russia’s entry into the Crimean peninsula sent oil prices sharply higher, but going back only six months shows us that oil is still in a downtrend. There is still economic weakness across the globe, including in the U.S. where GDP is still strong, but running below optimistic forecasts. Simply said, if oil prices continue to rise, there is going to be even more pain felt by emerging markets, and that will quickly reduce demand and send prices lower. A clear sign that this interpretation is correct is found in copper, which has moved lower at the same time that oil has rallied. Energy stocks haven’t followed crude higher either, showing that investors are discounting the move.

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iShares MSCI Mexico (EWW)

From a technical perspective, Mexico is turning into a bearish situation. The 50-day moving average is below the 200-day moving average, and the 200-day moving average has an increasing downward slope. The ETF is approaching an important support/resistance level, one that has been hit multiple times since 2011. A slip lower here could take the fund as low as $55 or $50.

A recent report by Fitch said that U.S. corporations are turning bearish on the country. Mexico has also seen its current account deficit rise as the Mexican peso weakens. This could be due to investor fear of another leg down in emerging markets, and if that does happen, Mexico may see a rapid decline.

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Market Vectors Junior Gold Miners (GDXJ)

Still waiting for pullback in the miners, but the chart continues to turn bullish. Gold is also looking ripe for a pullback after a strong two-month rally.

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