The S&P 500 is looking to end the week either at or within a few ticks of a new historic high. The same cannot be said for a number of ETFs that have been struggling the last couple of weeks.
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The now five-year old bull market has sent nearly every sector higher since 2008. However, when analyzing short-term movements in the market, sectors tend to outperform and underperform as money shifts back and forth.
The normal rotation of money creates opportunities for investors to buy into bull markets on pullbacks. There are three such ETFs that are in the midst of what appears to be a normal pullback that investors should not ignore.
KraneShares CSI China Internet ETF (KWEB)
The niche international ETF is a basket of 28 Chinese stocks that concentrate on the Internet sector. Top holdings include Tencent Holdings, Qiho 360 Technology (QIHU),Baidu.com (BIDU), and Ctrip.com (CTRP). The ETF, which has been around since August 2013, already has $80 million in assets even though it has two competitors in the niche space.
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The recent pullback has the ETF down 10 percent from the high after its largest holding fell on earnings. The good news is that both Tencent and KWEB have held above support and their respective 50-day moving averages. The odds for a bounce are high.
Global X Social Media ETF (SOCL)
Pulling back in a similar fashion to KWEB, the social media stocks are taking a breather after hitting a high earlier this month. SOCL is composed of 27 stocks that are involved in the social media space led by Facebook (FB), Tencent Holdings, and LinkedIn (LNKD). The holding of Tencent is the only overlap of the top ETF portfolios.
The top holding, FB, has sold off seven percent from an all-time high and has been able to hold both price support and its 50-day moving average. SOCL has breached its 50-day moving average as it has several times in the past, but is at price support and setting up for a bounce.
Global X Lithium ETF (LIT)
The announcement of the new Tesla Motors (TSLA) gigafactory that will build batteries sent the lithium stock higher last month. After rallying 20 percent, the ETF has pulled back six percent to price support at the $13.50 area. The top three stocks are the world leader in lithium production and if the trend continues towards more lithium-ion batteries in electric vehicles it could be a long-term boost to the stocks and the ETF.
The ETF also has exposure to the battery makers, which have also received a boost from the TSLA news. While LIT may be aggressive, the longer-term trend and the chart suggest a rally in the near future.
Matt McCall is the editor of ETF newsletterMarkETForceavailable at marketfy.com
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