High Probability ETF Strategies for Traders: Japan Dips, Semiconductors Slide

If you read Larry Connors’ Trading Lesson of the Day from Thursday morning (click here, if you missed it), then you were reminded that when it comes to high probability ETF trading, sector ETFs tend to outperform commodity ETFs and country ETFs tend to outperform sector ETFs. This is because country ETFs do a better job of reverting to the mean, of resuming uptrends after short term pullbacks above the 200-day moving average, for example, than sector ETFs - with sector ETFs doing a better job of mean reversion than commodity ETFs.

outperform in this ORDER
country ETFs > sector ETFs > commodity ETFs

Does this mean that traders cannot use high probability ETF trading strategies
with commodity based ETFs? No. It simply means that the edges are far better with other kinds of ETFs such as those based on equities instead of commodities
, whether those equities are grouped together because they belong to the same sector, or because they are representative of the major stocks of a given country.

Commodity ETF GSG, as I noted above, is not the preferred vehicle for high probability ETF trading - certainly compared to EWJ and SMH. Still, there is no doubt that the ETF has slid into oversold territory and that GSG has responded positively to short-term oversold conditions since rallying above its 200-day moving average in July 2009.
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High Probability ETF Trading: Choosing the Best ETFs to Trade

Historical Volatility: The higher the better.

Country Funds versus Sector Funds: I prefer Country Funds
over the Sector Funds.
( asr: and next level Sector Funds over Commodity funds )

Multiple Country Funds triggering at the same time: Start with the major U.S. indices first before moving abroad.

These are good guidelines backed by statistical results going back to 1993