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Don't Ignore China ETFs

Not surprisingly, GXC has been on a roll since the June 24 lows. More recently, this emerging-market ETF rose above its 200-day trend line, suggesting that a long-term uptrend may be in its earliest stages.

The month-over-month comparison with U.S. equities is worth a look as well. The seemingly unstoppable momentum that the S&P 500 SPDR Trust (SPY) boasted through July appears to be stalling.

In contrast, the previously moribund GXC is riding a wave. Could we be looking at a meaningful rotation out of pricier developed-market ETFs into cheaper China ETFs? Does the pickup in Chinese demand bode well for resources-related ETFs? Does the directionality of future stimulus as well as future economic progress hold more sway than "absolute" data? If so, could China-related investments continue to out-hustle the U.S. in the months ahead?

Month-Over-Month Improvements For China ETFs And Resources-Related ETFs
1 Month %
Market Vectors Gold Miners (GDX) 11.9%
Market Vectors Steel (SLX) 11.0%
SPDR S&P China (GXC) 8.8%
iShares FTSE China 25 (FXI) 8.7%
iShares MSCI Peru (EPU) 8.0%
iShares MSCI China (MCHI) 7.5%
SPDR Metals and Mining (XME) 6.6%
Market Vectors Coal (KOL) 5.9%
S&P 500 SPDR Trust (SPY) 0.9%

There's little doubt that momentum over the last month has shifted from domestic ETFs to foreign ETFs. Europe is getting more attention, too. The shift may be a function of a greater comfort with the world's economic prospects or a greater willingness to take equity risk. Similarly, the "rotation" may be due to the directionality of future stimulus and future profitability abroad. Regardless, the upswing in China ETFs and resources-related ETFs is worth watching.

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

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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