NEW YORK ( ETF Digest) -- In the past few years, one of the primary trends for investors was to internationalize their portfolios. A growing list of ETFs also made this possible and easier. Doing so was believed to provide more diversification and at the same time add exposure to economies with superior growth prospects. From a performance perspective, this proved rewarding until global markets, particularly debt-ridden eurozone economies, suffered serious declines. Small-cap sectors have always exhibited the highest volatility (beta) characteristics as markets trended higher or lower. When markets trend higher, outperformance is generally exhibited and the opposite occurs as trends reverse. The latter held true in 2011 as markets declined and investors halted fund flow reversing course.
Selecting the Top 10 ETFs within declining markets may seem odd but our objective is to find those issues that are well-structured and, as conditions improve in the future, offer suitable choices given the many ETFs in this sector. Recently markets have been hard hit overseas and most growth in equity sectors has been more U.S.-centric leaving some international sectors less in focus. This lack of interest overall combined with distrust of debt riddled overseas sectors and inherent high volatility has led to underperformance in the sector. To add value, we feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12-month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach. Subscribers to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.