Wall Street regained some lost ground last week as investors appeared less fearful to jump back into the equity markets. Corporate earnings were mostly upbeat, although several big financial institutions missed estimates while Apple and Google both blew past analyst predictions. Emerging market equity indexes also ended the week in green territory. Gold took a breather from its upward surge and traded sideways all of last week, managing to set an all-time high at $1,610 an ounce on Tuesday. Crude oil on the other hand slowly crept up from $96 a barrel on Monday and ended up closing right under $100 a barrel on Friday.
The coming week is stacked with several major economic reports on the international front , while investors at home will be kept even as a round of data from the housing and manufacturing sectors hits the street. U.S. Consumer Confidence on Tuesday will certainly get some attention as investors look for evidence of an economic recovery, while the main event is easily this Friday when U.S. GDP is released.Below we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:
- Rydex CurrencyShares British Pound Sterling Trust (FXB): United Kingdom GDP is slated to come out early Tuesday morning and given last quarters fairly weak reading of 1.6% growth, investors will surely be looking for a surprise to the upside. Otherwise, its likely that additional fears about the financial health of the Eurozone will arise, potentially sending FXB lower as the Pound sells-off versus the U.S. Dollar in the currency market.
- iShares Dow Jones U.S. Home Construction Index Fund (ITB): U.S. housing market data has been dismal to say the least for the past couple months and investors will likely treat any good news as signs of recovery once the S&P Case-Shiller Home Price Index hits the street on Tuesday at the market open. Upticks in housing prices demonstrate an increase in demand, however a disappointing report will likely spell trouble for the residential construction industry and send ITB downhill.
- Merrill Lynch HOLDRs Internet (HHH): Internet retail giant Amazon is scheduled to release quarterly performance results on Tuesday after the bell and the company has a history of volatile post-earnings trading. As a result, HHH could see some volatility on Wednesday morning given that Amazon is the funds top holding and accounts for just under 45% of total assets.
- iShares MSCI Australia Index Fund (EWA): This ETF could see an increase in trading volumes on Wednesday morning as investors scramble to re-adjust their positions following the Australian Consumer Price Index released on Tuesday evening. Unlike most other developed nations, Australia publishes CPI on a quarterly basis instead of monthly, increasing the market impact of the report upon release.
- State Street Industrial Select Sector SPDR (XLI): The domestic industrial sector will likely get investors attention on Wednesday morning at the market open once Durable Goods Orders for June are released. Last month’s disappointing reading of 1.9% gave investors a reason to sell, while a surprise to the upside this time around can easily send XLI higher.
- WisdomTree Dreyfus New Zealand Dollar Fund (BNZ): The Reserve Bank of New Zealand is slated to announce its decision regarding interest rates on Wednesday evening, which may result in BNZ gapping either higher or lower at Thursday’s open depending on how investors react to the economic commentary released after the decision itself. Analysts are widely expecting for the interest rates to remain unchanged at 2.50%.
- VelocityShares Daily Inverse VIX Short-Term ETN (XIV): U.S. GDP is scheduled to come out on Friday morning and JPMorgan Chase forecasts 2% growth in the second quarter of 2011, not much of an improvement from the last reading of 1.9%. XIV tracks the inverse of Short-Term VIX (Volatility Index) futures and this fund will surge higher if U.S. GDP comes in better than expected and investors rush into equities.
Equity markets regained their footing last week as corporate earnings were mostly surprises to the upside, although financial giants Goldman Sachs and Bank of America fell short of analyst expectations, sparking a short-lived sell off. Ongoing debt woes at home and overseas continue to dominate headlines as investors await political negotiations. Earnings season continues into next week and we remain cautiously optimistic on global equity markets. Below we have highlighted some technical trade ideas for the upcoming week. Just note that most of these recommendations require active management as they are only relevant for a very short period of time. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
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