Tread Lightly In Uncertain Times

by on June 20, 2011 | ETFs Mentioned:

Thanks to stock markets managing to finish in the green for the week, at least in the S&P 500 and the DJIA, some are beginning to think that the recent downtrend in markets is finally over. However, any hope of a surge this week could be cut short by a continuation of the Greek debt crisis, especially if it spreads to other highly indebted nations in the region. Amid this shaky environment, many of our trading ideas from last week performed well, although our commodity pick experienced weakness thanks to a surging dollar. With a key Fed meeting and more information on the euro crisis, this is shaping up to be a very important week for markets, hopefully giving stocks a solid direction heading into the third quarter. With this backdrop, we highlight some of the other key data releases this week as well as few possible trades that investors could make this week to hopefully bring portfolios back into the green on the year.

Weekly Outlook

The coming week will keep investors busy as a number of key central banks release information or meet to discuss rates. Additionally, investors should look for earnings reports from a few key companies, such as FedEx and Oracle, to set the tone on the domestic front for a variety of industries. U.S. data hits a lull in this time period as only GDP and durable goods orders are meaningful reports on tap in coming days. Data from Europe will also be light, suggesting that developments in Greece will once again capture the attention of investors around the globe in coming days. Below we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:

  • S&P North American Technology-Software Index Fund (IGV): Oracle Corporation, one of the largest providers of technology software and services in the world, reports earnings on Thursday after the bell. The California-based company takes the top spot in IGV at over 9%. Additionally, investors should also note that Adobe Systems, which is the fourth biggest allocation in IGV, also reports earnings this week, further adding to the volatility that this product could experience over the next few days.
  • Rydex CurrencyShares Australian Dollar Trust (FXA): The Australian currency has been pretty much flat over the past few weeks despite ongoing weakness in commodity markets, a poor sign for this commodity currency. That weakness has not been enough to offset the appeal of one of the highest interest rates  in the developed world, as investors have continued to pile into the Aussie dollar. However, this could be put to the test later this week as the Reserve Bank of Australia releases the minutes from its most recent policy meeting. These minutes could give investors further insight into what the bank is expecting for rates in the future, potentially influencing FXA in the process.
  • Global X FTSE Norway 30 ETF (NORW): Thanks to turmoil in many of its key trading partners and a tumbling price for crude, NORW has been struggling as of late; this fund has slumped by close to 7% in the past two weeks alone. Still, Norway is in much better shape than many of its peers in the region thanks to a strong and stable krone. In fact, the country’s central bank has risen rates twice this year up to 2.25%, a level that could change later in the week at when the central bank meets. Before the market opens on Wednesday, investors should look for Norway to give its decision on interest rates, potentially moving Norwegian heavy funds such as NORW.
  • PowerShares Dynamic Retail Fund (PMR): Investors should look for this fund to be in focus thanks to some key names reporting earnings. Both Walgreen’s and Bed Bath & Beyond report this week with WAG coming in before the bell on Tuesday and BBBY reporting after the market close on Thursday.
  • PowerShares DB USD Index Bullish Fund (UUP): The dollar could be in focus for a variety of reasons this week, ensuring that investors will see high levels of volatility and a couple of big moves in this fund before the end of trading on Friday. Events in Europe as well as data releases in the U.S. could drive markets but many will likely focus in on Wednesday for the Federal Reserve meeting to start a trend for UUP. The central bank is expected to keep rates steady and announce an end to its QE2 program

Trading Ideas

Although huge risks remain in the marketplace, domestic equities did manage to finish in the green last week thanks to speculation over a Greek bailout package to close out the week. Despite this uncertainty, we believe that there are still plenty of opportunities in the marketplace for shrewd investors, and especially those that are willing to take some risks. Just note that most of these recommendations require active management as they are only relevant for a very short period of time. Furthermore, with the Federal Reserve meeting this week all bets are off should the central bank hint at QE3. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques:

Pro Membership Required to Continue Reading ETFdb Pro

To continue reading this article, you must be an ETFdb Pro member. Please login or begin your 14-day free trial to continue reading. There are several benefits to becoming an ETFdb Pro member today:
  • Register on ETFdbAccess to 50+ All-ETF model portfolios. Whether you're a long-term, buy-and-hold investor or a more active trader looking to establish a tactical position, our collection of ETFdb Portfolios has something for everyone.
  • ETFdb Realtime Ratings show you exactly where each fund stacks up next to the competition. Get objective, in-depth, custom research on every ETF.
  • Pro members have Unlimited Excel Download capabilities across the entire database; users can easily download more than 200 data filled paged and also export results to Microsoft Excel from every tool.
  • Get ETF Picks of the Month. For active investors seeking ETF investment ideas, our team analyzes technical and fundamental price drivers of more than 1,400 ETFs to identify both short and longer-term opportunities with a focus on absolute returns. Recommendations are actionable investment ideas that are poised for outperformance over the next week to 90 days.

Begin Your Free 14-Day Trial Now