3 Market-Defining ETFs Suggest More Stock Pullbacks To Come

NEW YORK (ETF Expert) -- European headlines are getting the lion's share of the blame for across-the-board stock weakness. In fact, every investor worry pales in comparison to eurozone debt concerns.

On the other hand, weak corporate forecasts and earnings misses are also making the rounds. Most troubling? The world's largest package delivery company, United Parcel Service (UPS), missed quarterly expectations and slashed its profit outlook for the full-year period of 2012. About a month ago, Federal Express (FDX) offered up similar warnings. (And yes, deliverers are blaming the uncertainty in Europe as well as uncertainty in the euro itself.)

Many investors view UPS and FDX as barometers for business health because they transport millions of packages daily. Similarly, the iShares DJ Transportation Fund (IYT) demonstrates just how fragile the economy may in fact be. The current price of this exchange-traded tracker of transporters (e.g., railroad, trucking, air freight, etc.) is currently below a long-term trendline.

Even as most of the chatter surrounds the usual eurozone suspects -- Greece, Spain, Italy -- the media granted less attention to a disturbing Moody's downgrade. Perhaps unexpectedly, Moody's altered its outlook of the German economy from "neutral" to "negative." If the fourth-largest economy in the world crumbles, then a European recession may eventually go global.

The iShares MSCI Germany Fund (EWG) provides an idea of whether or not investors expect German equities to rebound quickly. Unfortunately, the current price of EWG is near its June lows. Worse still, the downtrend appears intact, as EWG has run into stiff resistance on its last two attempts to recover its 200-day moving average.

Many continue to celebrate the resilience of U.S. stocks in a jittery global environment. However, the jubilation may not last much longer. Whereas large-cap barometers like the Standard & Poor's 500, Dow Jones Industrial Averageand Nasdaq are still trading above their respective trendlines, the small-cap space is far less convincing.

The iShares Russell 2000 (IWM), a premier gauge, is retesting a technical downtrend. If IWM cannot turn it around soon, those without a plan to reduce risk could see severe damage to account values.

You can listen to the ETF Expert Radio Show "LIVE", via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.



Gary Gordon reads:

Real Clear Markets
Jeff Miller
indexuniverse
Charles Kirk
On Twitter, Gary Gordon follows:

Jonathan Hoenig
Doug Kass
Hard Assets Investor