Weekly ETF Winners – CVOL, CHOC, GLDX
It’s been an interesting week on Wall Street. A series of weaker than expected economic reports to start the week fanned the flames of the market-wide selloff that began a few weeks ago.
One thing’s for sure, it made for some unusual weekly ETF winners. Let’s take a closer look at three of the top performing non-leveraged ETFs…
C-Tracks Citi Volatility Index (CVOL)
CVOL checks in today with a robust 17% gain over the last week. Any gain is unusual for this ETF that’s down 91% over the last year!
It tracks an index designed to measure “directional exposure to the implied volatility of large cap US stocks”. In other words, CVOL is designed to go up in value when the S&P 500 becomes volatile and it should go down when the markets are less volatile.
The index attempts to track volatility by buying VIX futures contracts and a short exposure to the S&P 500 Total Return Index.
It’s no wonder CVOL had a great week…
The weak economic data this week sparked fear amongst investors. And when fear goes up, so does volatility. That sent the VIX up to its highest level in months. And when you combine that with a significant selloff in stocks, you have a recipe for CVOL to run higher.
Here’s the thing…
Any short term gains in CVOL are overshadowed by its very poor long term performance. In short, this ETF, or the index it tracks, seems to be structurally flawed. And investors will likely end up losing money if they hold it for any extended period of time.
CVOL is clearly a trading vehicle for short term or swing traders and not designed to be held for the long run.
iPath Pure Beta Cocoa ETN (CHOC)
Another fund delivering big gains is CHOC. It’s up nearly 7% over the last week.
As the name suggests, CHOC is designed to track returns of investing in futures contracts in the Cocoa markets.
What’s behind the run up in CHOC?
According to the National Confectioners Association in Washington, the demand for North America’s grindings, a measure of demand by end-users, unexpectedly rose 5.8% over last year. The good news sparked a rally in cocoa commodity prices. In fact, Cocoa has been the top performing soft commodity over the last two weeks.
Global X Gold Explorers ETF (GLDX)
GLDX’s 5.5% gain puts it among the top performing non-leveraged ETFs this week. It’s now up 12.6% over the last month. But don’t get too excited… GLDX is down a whopping 55% from the 52-week high.
As you might have guessed, GLDX tracks an index of companies in the gold mining industry that are actively exploring for gold. The ETF is made up of 23 stocks. And the top 10 holdings represent 59% of the total assets.
Why is GLDX rising?
The weak economic data and poor stock performance this week sparked a rally in the downtrodden gold and gold miners market. This week was basically a reversal of fortunes for gold bulls that have been run over by a red hot stock market for the last six months.
It remains to be seen if gold can regain its bullish momentum or if this is merely a pause as gold prices continue to fall. At this point, gold is locked in a bearish downtrend. And if gold continues to fall in value, GLDX will likely fall with it.
Here’s the upshot…
The pullback in US stocks this week caused some of the worst performing ETFs over the last few months to become this week’s top performing ETFs. But they’ll be hard pressed to repeat if stocks regain their bullish momentum next week.
Good Investing,
Corey Williams
Category: Commodity ETFs, ETFs, Sector ETFs
