Beware Of Bargain Shopping

by on May 14, 2012 | ETFs Mentioned:

Stock markets headed south last week as uncertainty over the political situation in Greece led many investors to question the health of the fragile currency bloc as a whole. Amidst the flurry of volatile trading on Wall Street, profit taking pressures also spread to commodities; futures prices for gold and oil both traded lower, settling below $1,600 an ounce and $96 a barrel respectively. The coming week appears to be stacked with key economic releases from both sides of the Atlantic ocean, and as such, investors will look for signs to bolster confidence in the global recovery [see also 3 ETFs For A Euro Zone Double-Dip].

Weekly Outlook

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

  • MSCI Germany Index Fund (EWG): European equity markets will likely take cues from the latest German GDP report on Tuesday. Analysts are eexpecting for German economic growth to come in at 0.1% versus the previous reading of negative 0.2%.
  • SPDR S&P Retail ETF (XRT): U.S. retail stocks could see some volatile trading on Tuesday, depending on how markets react to the latest domestic retail sales data. Analysts are expecting for retail sales to come in flat for April, versus the previous month’s reading of 0.8%.
  • Dow Jones US Home Construction Index Fund (ITB): Upcoming home builders index data could put this ETF in the spotlight on Tuesday. Analysts are expecting for the index to come in at 27 and sail past the previous month’s reading of 25.
  • SPDR Gold Trust (GLD): Gold futures may find themselves in a volatile trading frenzy following the release of the latest Fed minutes on Wednesday. GLD could spike in either direction as investors interpret economic commentary from Chairman Bernanke.
  • MAXIS Nikkei 225 Index ETF (NKY): Japanese equity markets could see an increase in trading volumes on Wednesday evening as GDP data is released. NKY could gap on Thursday morning, depending on how investors react to the latest economic growth report; analysts are expecting for quarterly Japanese GDP to come in at 0.9% versus the previous reading of negative 0.2%.
  • IQ Canada Small Cap ETF (CNDA): Canadian stocks will likely take cues from the latest inflation data on Friday morning. Canadian CPI is expected to come in unchanged at 1.9%, which could sway CNDA in either direction depending on how investors interpret the latest inflation reading.

The Volatility Index (VIX) remains near the 20 mark, which suggests that profit taking pressures are likely to develop at the slightest sign of economic uncertainty. Uncertainty levels remain elevated given the looming debt drama in Greece, which has proven to be far from over. If the S&P 500 Index breaks below support at the 1,340 level, selling pressures could accelerate; however, investors should keep in mind that a sell-off reaction to news in Europe will more than likely be exaggerated, perhaps creating lucrative buying opportunities for savvy traders.

Below, we have highlighted three 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: Long MDY 

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Disclosure: No positions at time of writing.