Do Fundamentals Justify The Wall Street Rally?

by on March 26, 2012 | Updated March 30, 2012 | ETFs Mentioned:

Stock markets retreated last week as sparse economic data releases paved the way for profit taking. This week will see a host of important fundamental news on the home front as investors digest durable goods orders, GDP, and consumer spending data. Markets are off to a hot start as Ben Bernanke’s speech on Monday morning lifted hopes for an additional round of stimulus, however expectations for further quantitative easing are still purely speculation at this point. The bull-train is gearing up again, although investors will need some fundamental evidence for the rally to be sustained.

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): The Case-Shiller home prices index is slated to come out on Tuesday morning, which could spark volatile trading in XHB as investors gain insights into the health of the domestic housing market. Analysts are looking for the figure to come in above the previous reading of negative 1.1%.
  • Van Eck Market Vectors Retail ETF (RTH): The retail sector may see an increase in trading activity as investors digest the latest consumer confidence reading on Tuesday. Analysts are expecting for the figure to come in at 70.0 versus the previous reading of 70.8.
  • Vanguard Industrials (VIS): Investors will shift their focus onto the industrial sector on Wednesday as durable goods orders data hits the street. VIS may see an increase in trading volumes depending on the latest reading; analysts are expecting for 2.9% growth in orders versus the previous reading of negative 3.7%.
  • iShares MSCI Germany Index Fund (EWG): German equity markets will come into focus on Thursday morning as investors react to the latest unemployment report. EWG may encounter volatile trading as analysts are forecasting a loss of 10,000 jobs.
  • iShares Russell 3000 (IWV): U.S. stocks will likely take cues from the latest GDP report due out on Thursday morning. Analysts are expecting for domestic growth to come in at 3.2% versus the previous reading 3.0%.
  • IndexIQ Canada Small Cap ETF (CNDA): Canadian GDP is slated to come out Friday morning, bringing the spotlight onto this small cap equity ETF. Analysts are forecasting for economic growth to come in at 1.7% versus the previous reading of 1.8%.

The upward trend across broad-based equity benchmarks is still in-tact and investors will look to the economic data releases this week for fundamental conviction to buy in. 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 GXC

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Disclosure: No positions at time of writing.