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KCE Has Been in Negative Territory Since the Start of 2016

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Overview of KCE

The SPDR S&P Capital Markets ETF (KCE) invests in a portfolio of capital market companies and seeks to provide returns that correspond to the S&P Capital Markets Select Industry Index, which is an equal-weighted index. Its equal-weighting means that it’s tilted toward smaller companies.

The index primarily invests in investment management companies such as State Street (STT), Northern Trust (NTRS), and Charles Schwab Group (SCHW). Its top ten holdings make up 26.5% of KCE.

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As of February 26, KCE has a market capitalization of $45.3 million. Year-to-date, shares of KCE have plunged 17.4%, as asset management companies have been hit hard by a sharp fall in trading commissions. Sharp corrections in stock markets (SPY), bond yields (TLT), and commodity prices have led to falling revenues and assets under management for these companies.

Moving average analysis

On February 26, shares of KCE closed at $36.25, below its 100-day and 50-day moving averages of $41.28 and $38.05, respectively, but above its 20-day moving average of $35.02.

The chart above shows that KCE has been trading below its moving averages since the beginning of 2016 and that it broke its 20-day moving average just last week. Technical analysts view this as a trend reversal. KCE lags financial sector ETFs, covering the insurance sector as well as regional banks.

RSI

The 14-day relative strength index (or RSI) for KCE is 51.8 as of February 26. Capital market ETFs suffered the most as trading commissions were hit hard by global uncertainty. Most banks reported lower trading revenues for 4Q15 and warned of further falls should the weakness continue.

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