These Lagging ETFs Show Big Problems in the Markets

NEW YORK (TheStreet) -- The Dow Jones Utility Average has a year-to-date decline of 6.3% after gaining 26% in 2014. The Dow Jones Transportation Average has a year-to-date loss of 5.9% after gaining 24% in 2014. The iShares Transportation Average ETF IYT has a year-to-date loss of 5.1% after gaining 24% in 2014.

This major shift in asset allocations is partially due to the end of quantitative easing by the Federal Reserve and in anticipation of the first rate hike as the Fed begins to normalize interest rates.

The three exchange-traded funds that track these markets have losses that exceed 5% year to date. Here are their performance measures, daily charts and the key levels at which to buy on weakness and to sell on strength.

Keep in mind that these lagging ETFs may not continue to lag in the months ahead as explained in these profiles.


Courtesy of MetaStock Xenith

The Utilities Select Sector SPDR Fund (XLU) had a close of $43.75 on Thursday down 7.3% year to date, but the year-to-date low of $43.01 has held since March 11.

The utilities ETF is below its 50-day and 200-day simple moving averages of $44.27 and $44.73, respectively, and in a "death cross" formation since April 28. The 200-day simple moving average has been a magnet since March 2 as a stabilization factor.

The weekly chart (not shown) will shift to positive if the ETF has a weekly close above its key weekly moving average of $44.42. This moving average will be declining each week, and the ETF has a momentum reading of 27.56 up from 27.30 last Friday.

Investors looking to buy the utilities ETF should place a good till canceled limit order to purchase the ETF if it drops to $41.17, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holdings should place a good till canceled limit order to sell the ETF if it rises to $46.78, which is a key level on technical charts until the end of June.


Courtesy of MetaStock Xenith

The iShares Transportation Average ETF (IYT) had a close of $154.23 on Thursday down 6% year to date, but the year-to-date low of $152.03 has held since April 6. This ETF has shown lower highs since setting its all-time intraday high of $167.80 on Nov. 28.

The transportation ETF is below its 50-day and 200-day simple moving averages of $157.67 and $156.54, respectively, and converging into a potential "death cross" formation. The 200-day simple moving average has been a magnet since March 26 as a stabilization factor.

The weekly chart (not shown) will is negative with the ETF below its key weekly moving average of $157.02. This moving average will be declining each week, and the ETF has a momentum reading of 33.81 down from 36.37 last Friday.

Investors looking to buy the transportation ETF should place a good till canceled limit order to purchase the ETF if it drops to $145.12, which is a key level on technical charts until the end of June.

Investors looking to reduce holdings should place a good till canceled limit order to sell the ETF if it rises to $164.55, which is a key level on technical charts until the end of May.


Courtesy of MetaStock Xenith

The iShares 20+ Year Treasury Bond ETF (TLT) had a close of $119.20 on Thursday down 5.3% year to date, trading as low as $118.64 on Wednesday. This ETF is down 14% since setting its all-time intraday high of $138.50 on Jan. 30.

The bond ETF is below its 50-day and 200-day simple moving averages of $127.63 and $123.71, respectively. This ETF has been below its 200-day simple moving average since May 4.

The weekly chart (not shown) will is negative with the ETF below its key weekly moving average of $125.72 and is approaching its 200-week simple moving average of $116.73. The ETF has a momentum reading of 27.59 down from 36.09 last Friday.

Investors looking to buy the bond ETF should place a good till canceled limit order to purchase the ETF if it drops to $114.44, which is a key level on technical charts until the end of June.

Investors looking to reduce holdings should place a good till canceled limit order to sell the ETF if it rises to $132.13, which is a key level on technical charts until the end of 2015.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.

Here's how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue while the 200-day simple moving average is in green.

Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007 and thus includes the Crash of 2008, then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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