Data Back In Focus As Stimulus Hopes Fade

by on June 25, 2012 | ETFs Mentioned:

Stocks fell victim to back-and-forth trading last week as stimulus hopes collided with concerning economic data on the homefront along with unresolved debt drama in the European currency bloc. The much anticipated FOMC announcement failed to provide the necessary kick-start to beat down equity markets as many had hoped for; instead it added to the clouds of uncertainty looming over the sluggish U.S. recovery. Investors will now look to positive data on all fronts for encouragement, although the Fed did leave the possibility for more stimulus on the table if deemed necessary [see also ETF Technical Trading FAQ].

Weekly Outlook

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

  • State Street SPDR Homebuilders ETF (XHB): This ETF may see a surge in trading volumes throughout the week as housing market data hits the street. New home sales data is due out on Monday morning while pending home sales are slated to come out Wednesday after the opening bell. 
  • Vanguard Consumer Discretionary ETF (VCR): Domestic consumer discretionary stocks will come into the headlines on Tuesday as investors digest the latest consumer confidence data. Analysts are expecting for the confidence figure to come in at 64.5, down slightly from the previous reading of 64.9. 
  • PowerShares DB USD Index Bullish (UUP): The U.S. dollar may take on “safe haven” appeal next week depending on the latest GDP report due out on Thursday. Analysts are expecting for domestic economic growth to come in at 2.0%, a fractional improvement from the previous reading of 1.9%. 
  • iShares MSCI United Kingdom Small Cap Index Fund (EWUS): This ETF may experience volatile trading on Thursday morning, depending on how markets react to the latest GBP GDP report just a few hours before Wall Street’s opening bell. Analysts are expecting for economic growth to come in unchanged at -0.1% on a year-over-year basis. 
  • iShares MSCI Canada Index Fund (EWC): Canadian equities will come into focus on Friday morning following the releases of the latest GDP report. Analysts are expecting for Canadian economic growth to come in unchanged at 1.6% on a year-over-year basis. 

The Volatility Index has cooled off considerably since soaring past the 25 level in early June of this year. Nonetheless, range-bound trading will likely dominate major equity indexes as investors remain worried over Europe, while the economic landscape at home can be described as stable at best. In terms of key price levels for the S&P 500, we see major support around the 1,280 level while selling pressures should be expected to resurface as the benchmark nears the 1,380 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 BTAL 

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Disclosure: No positions at time of writing.