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Most Overbought ETFs are Bond Funds
Despite the strength and speed of the stock market's recovery from the March lows, most overbought ETFs are found among bond funds--and to a lesser extent commodities--rather than among equities (see chart below).
There are 59 fixed income ETFs with assets under management (AUM) totalling $387 billion that have a Relative Strength Indicator ("RSI") over 70, the typical definition of "overbought," across various categories, including TIPS, Munis, Corporate debt and Treasuries.
Examples include the Vanguard Long-Term Bond ETF (BLV, with an RSI of 82), the iShares TIPS Bond ETF (TIP; RSI of 79) and the Vanguard Total Bond Market ETF (BND, 78).
Meanwhile there are 11 Commodity ETFs with AUM of $70 billion that are overbought, including the SPDR Gold Shares (GLD, 78).
The smallest slice of the pie is 27 smaller equity funds, with AUM totaling only $31 billion. Many are China and precious metals-related funds, such as the VanEck Vectors ChinaAMC SME-ChinNext ETF (CNXT, 75) and the Sprott Junior Gold Miners ETF (SGDJ, 73).
Investors who hold any of these ETFs should consider taking some profits, as overbought stocks are often ready for a pullback. And other than GLD--which we don't rate--all of these funds have rather low ALTAR Score ratings.
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