Expect More Volatility

by on November 14, 2011 | ETFs Mentioned:

After another up-down week dominated by Euro zone debt drama, domestic equity indexes managed to clinch a gain amidst the volatility. Investor sentiment swayed wildly as the anticipation of Italian Prime Minister Berlusconi’s resignation coupled with ongoing Italian debt woes sparked sell-offs one day and rallies the next, across virtually every corner of the global equity market. Gold prices oscillated between the $1,800 and$1,750 levels, managing to settle in the upper-half of its trading range as the trading week drew to a close.

Weekly Outlook

The coming week will see a host of economic releases both at home and on the international front, including several key CPI releases. Stock markets will likely continue to take cues from the Euro zone as investors keep their eye on the Italian debt situation. Below, we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:

  • MAXIS Nikkei 225 Index ETF (NKY): Investors may expect a gap on NKY as the market opens on Monday morning as Japan GDP data is released on Sunday. Analysts are expecting GDP for the third quarter to swing into the positive at 1.4% from the previously reported -1.5%.
  • SPDR S&P Retail ETF (XRT): Analyst forecast retail sales to be at 0.1%, down from from 1.1% as worries about the economy continues. Investors will most likely see an increase in the trading volume of XRT on the release of this data on Tuesday morning.
  • MSCI EMU Index Fund (EZU): The Euro-Zone GDP, one of the most anticipated data points for the coming week, will be released on Tuesday. EZU will likely experience some volatility with investors uncertain about the outlook of the European economy. Recent news in both Italy and Greece has shaken up the market.
  • COMEX Gold Trust (IAU): U.S. CPI data as a measure for inflation will likely increase the trading volume of IAU. Analysts are forecasting CPI to be at -0.1% from previously reported 0.3%. Investors will consider if they want to flee to safe havens such as gold on news of this data.
  • Dow Jones U.S. Home Construction Index Fund (ITB): The home builders’ index is expected to be released on Wednesday morning. Better than expected data will help investors restore some confidence in the housing market, potentially leading to higher trading volumes in ITB.
  • CurrencyShares Euro Currency Trust (FXE): Euro-zone CPI will give investors a better idea of the inflation rate in Europe as the data is released on Wednesday morning. FXE may experience higher trading volume as investors react to the latest inflation data from the struggling European markets.
  • CurrencyShares Canadian Dollar Trust (FXC): Canada CPI will be released on Friday and FXC may experience a gap at the trading bell as this data is released before the market opens.

Resurfacing Italian debt woes have paved the way for continuing volatility across nearly every segment of the global financial market. Price action on Wall Street will continue to be heavily influenced by developments overseas as investors remain very concerned with the financially fragile health of the debt burdened currency bloc. Below, we have highlighted some technical trading ideas for the upcoming week. 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.

Actionable ETF Idea #1: Short EWA

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