ETFs That Have Entered Bear Market Territory

On 8/2/11, the same day that President Obama signed a bipartisan bill to raise the debt ceiling, the stock market floor collapsed. Specifically, the S&P 500 closed below its 200-day moving average — a technical trendline for stock buying support.

Indeed, the heralded benchmark of U.S. stocks hadn’t finished below its 200-day MA since last September. Equally disconcerting, the S&P 500 ended at its lowest ebb for the current year (1254.05).

Although a number of investment professionals regard the event as a bear market signal, the S&P 500 is still only 8% off 52-week highs. In fact, U.S. stocks have yet to drop 10% from the top — a percentage change that analysts use for describing an official “correction.”

While it’s true that the S&P 500 is exhibiting signs of gum disease, other key stock barometers have shown indications of full-fledged tooth decay. Consider the iShares MSCI European Monetary Union Fund (EZU). It shed -4% on 8/2/11 on 2x its normal volume to end the day -18% off an April 2011 peak.

Had the euro not gained close to 7% on the U.S. dollar this year already… and had the fund not provided two quarterly dividend payments through the end of June… EZU would be down significantly more. In other words, the MSCI European Monetary Union Index that consists of stocks from 11 countries (i.e., Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal and Spain) is already in a bear market.

Did you think that social media, the Internet, software and cloud computing meant that “tech” was relatively fail-safe? Not if you chose the iShares PHLX Semiconductor Fund (SOXX) or the iShares S&P Networking Index Fund (IGN). The markets have slammed SOXX for a bearish -20.5%, while IGN has shed a more traumatic -27.5% since topping out in February.

You may have heard that construction was a bright spot in a weakening U.S. economy. True, the Commerce Department reported on Monday that construction spending had risen 0.2% in June, slightly more than economists had expected. Moreover, the latest reading marked the third straight month of gains.

On the other hand, spending on U.S. residential projects dropped 0.3% from the prior month and the home-ownership rate in the U.S. continues to decline. The result? “Hell on earth” for companies represented by iShares DJ Home Construction (ITB). The homebuilding investment vehicle has gone to pieces, losing roughly -21% since January of this year.