Black Cross? International ETFs Haven't "Crossed Over"

If you’re like me, you get a whole lot of financial e-junk… spam filter or not. Yet one marketing pitch for an e-letter did sneak into my “Must Read” box last week.

Here’s a brief synopsis from the sales plug:  China used to be one of the hottest markets in the world. But not anymore. The iShares China 25 Index (NYSE: FXI) is about to signal a catastrophic bear market, the likes of which you’re just not prepared for.

Of course, the solution for mega-profits is to buy the newsletter service… and that’s not something I had any interest in. However, I was intrigued by this mysterious signal that China had supposedly been flashing.

It turns out, the technical indicator that the writer referred to was the “black cross.” Naturally, I’ve seen discussion and debate about black cross events many times in 20 years. Essentially, when an ETF’s falling 50-day trendline (moving average) reaches an ETF’s rising 200-day trendline (moving average), the near-term technical weakness may be bearishly troubling news in the months ahead.

Here’s the “black cross” for China (NYSE: FXI):

 

Of course, there’s a few problems with clinging to a single ETF and/or a single indicator. First of all, the black cross did not occur for any of the other major China ETFs, including PowerShares China Halter (NYSE: PGJ), China Small Cap (NYSE: HAO) or Emerging Asia (NYSE: GMF).

Secondly, the price of all China ETFs, including FXI above, recently climbed back above 50-day trendlines; the price of all the China ETFs are above 200-Day trendlines as well. These facts alone signify a strong "buy" signal for technical analysts.

Third, not only did the other China ETFs fail to cross over in "black cross" fashion, none of the other major index-tracking ETFs demonstrated black cross events; FXI’s isolated occurrence doesn’t provide the evidence for broader bearish prognostications.

Here are charts for Vanguard Emerging Markets (NYSE: VWO), iShares MSCI EAFE (NYSE: EFA) and SPDR S&P 500 (NYSE: SPY). Once again, technical analysts would see the absence of any “crossing over,” as well as prices that are well above long-term, 200-day moving averages, as evidence of a continuing bull market… at least for now. Stay tuned!

 

 

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