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ETF Chart of the Day: International Developed Markets (MSCI EAFE)

tlydon@globaltrend.com (Tom Lydon)

We saw heavier than usual call activity yesterday in iShares MSCI EAFE (EFA) as the ETF is challenging its 200 day moving average once again.

It failed at this level on two previous occasions since the middle of May, but after finding technical support on its 50 day moving average recently, there has been renewed interest in call buying.

Having debuted back in 2001, EFA is one of the most successful and largest ETFs ($33 billion under management) and delivers exposure to Europe (60.68%), Japan (21.76%), Australia (9.92%), and Developed Asia (4.77%).

From a sector standpoint, the fund is tilted heaviest to Financial Services (17.59%), followed by Industrials (13.30%), Consumer Staples (11.66%), Consumer Discretionary (10.26%), and Health Care (9.94%) and top holdings are companies including Nestle, HSBC Holdings, Vodafone Group, Novartis, and BP.

Year to date, after a rocky road, EFA is currently posting a gain (+1.57%) but it continues to badly trail the U.S. Equity benchmark, the S&P 500, which is up 10.50% during the same time period.

In the trailing one year period, the under-performance of the MSCI EAFE is even more notable, as EFA has fallen 14.22% versus the S&P 500 up 7.46%, and in the fiver year trailing period EFA has lost 35.20% versus the S&P 500 down only 4.42%.

At this current price juncture, it will be important for us to see EFA maintain momentum above its 200 day moving average for any signs of continued strength as we head into the latter part of 2012.

Similarly, those playing EAFE from the “long” side who are short term oriented and/or comfortable using leverage for quick directional moves may consider ProShares Ultra MSCI EAFE (EFO) which delivers two times the daily leveraged returns to the MSCI EAFE index.

Additionally, a newer ETF to hit the landscape that has seen some impressive flows recently is iShares MSCI EAFE Minimum Volatility (EFAV) which aims for lower beta and volatility than the actual MSCI EAFE benchmark.


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