Below is an updated look at our trading range screen for the 30 largest country ETFs trading on US exchanges. A summary of how to read the screen is shown at the bottom of this post, but in general, ETFs in the red zone are in overbought territory, while ETFs in the green zone are in oversold territory.
Nearly all of the country ETFs shown have moved lower within their trading ranges over the last week, but most remain overbought and above their 50-day moving averages (black vertical line). The US (SPY) is now one of the most overbought countries, as Europe and many emerging markets have sold off recently. Germany and France are right at the cusp of overbought territory right now, while Italy and Spain have moved all the way down to their 50-days.
Europe was a central performance driver of US stocks in the middle part of 2012, but we de-coupled from Europe in the fourth quarter as domestic political issues sprung up. The US played catch up to the rest of the world in January, but over the last two days, we've started to trade in reaction to European issues once again. It will be interesting to see how this plays out over the next few weeks. Will US markets continue to react to Europe as they have this week, or will we brush aside any non-domestic issues and trade on things like economic reports and earnings?
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