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Global Small-Cap ETF Setting up Nicely


U.S. small-caps have impressed this year, a fact confirmed by the 31.3% year-to-date gain for the iShares Russell 2000 ETF (IWM) , the largest small-cap ETF by assets. The iShares Core S&P SmallCap 600 ETF (IJR) has been even better with a 34.2% 2013 pop.

Small-cap ETFs with a global tilt have not been too shabby, either. The $747.8 million WisdomTree International SmallCap Dividend Fund (DLS) has surged 23%, including paid dividends. And the dividend element is something to consider. DLS has a 30-day SEC yield of 2.99%, more than double the 1.23% found on IWM. [A Look at International Dividend ETFs]

Country allocations are also pivotal with DLS and a look at the ETF’s country exposures explains why the fund has been solid this year. While DLS offers exposure to 22 countries, the top three – Japan, Australia and the U.K. – combine for 56% of the ETF’s weight. With a  weight of 15.8%, the U.K. is the third-largest country weight in DLS, but that is more than triple the weight given to Sweden, the fourth-largest country exposure.

The heavy exposure to Australia, Japan and the U.K. has proven beneficial for DLS shareholders because those have been three of the better performing ex-U.S. developed markets this year. [Evaluating Small-Cap ETF Indices]

Turning to the technical, DLS could be poised to deliver further upside.

“DLS has once again pulled back to and “undercut” the 20-day exponential moving average, where there is also support from the 38.2% Fibonacci retracement level, as well as the prior swing high of the last short-term consolidation,” said Deron Wagner of Morpheus Trading Group.

Fibonacci levels are used by technical traders to measure important support resistance levels.

“On the longer-term weekly chart of DLS, there is support from a dominant uptrend line that began with the low of June 2013. The longer a trendline has been in place, the more likely that trendline is to continue providing support,” added Wagner.

Since bottoming in July, DLS has made a series of higher highs, a bullish sign. The ETF currently resides almost 12% above its 200-day moving average.

WisdomTree International SmallCap Dividend

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of IWM.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.