Be Mindful Of Profit Taking

by on July 2, 2012 | ETFs Mentioned:

Equity markets are holding above key technical support levels while developments in Europe and mixed data on the home front continue to pave the way for back-and-forth trading; the S&P 500 Index is once again flirting with resistance near the 1,370 level after bouncing off 1,310 last week. U.S. Treasuries and gold continue to trade sideways although both assets classes appear poised for further upside as they have bounced off near-term support levels [see also The Definitive Guide To The American Eagle Coin].

Weekly Outlook

Below, we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:

  • NASDAQ Global Auto Index Fund (CARZ): This ETF may see a surge in trading volumes on Tuesday as June motor vehicle sales data hits the street. Analysts are expecting for the figure to come in at 13.9 million versus the previous reading of 13.8 million.
  • CurrencyShares Australian Dollar Trust (FXA): The Aussie dollar will come into focus on Monday evening as the Reserve Bank of Australia issues its rate decision along with an economic outlook. FXA could gap at Tuesday’s opening bell depending on the overnight reaction in the currency market.
  • Euro Debt Fund (EU): This ETF could be in for a wild trading session on Thursday as investors react to the latest European Central Bank rate decision. Analysts are expecting for the ECB to cut the rate from 1.00% to 0.75%, in hopes of easing the borrowing burden in the financially fragile currency bloc.
  • ETRACS Fisher-Gartman Risk On ETF (ONN): This ETN, which offers exposure to assets classes that have a tendency to rally when economic growth expectations deteriorate, will come into focus on Friday morning as investors focus their attention on the latest domestic employment report. Analysts are expecting for nonfarm payrolls to increase to 100,000 from 69,000, although the unemployment rate is expected to remain unchanged at 8.2%.

The Volatility Index (VIX) is back below 20 after last week’s massive rally, however uncertainty may return in the coming days from a technical perspective. The VIX is hoovering near support at the 17 mark which it previously bounced off on 6/21/2012; likewise, any spikes in volatility should be capped below the 22.50 level.

Below, we have highlighted three fundamental 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: Long JJC 

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Disclosure: No positions at time of writing.