ETF Insider: Earnings, The Fed, And Spain Oh My!

Stocks ended on a positive note last week although Friday’s rally wasn’t enough to mask the looming uncertainties still plaguing virtually every corner of the global market. Asian markets remain wobbly on concerns over the Chinese economic recovery, while in Europe bond yields remain elevated as investors await for lawmakers to implement the Spanish rescue package. At home, volatility levels should remain elevated as well; corporate earnings season is picking up steam this week with several bellwethers reporting, including IBM, Bank of America, and Google, while the spotlight will likely focus on Chairman Bernanke as he testifies before Congress on Tuesday and Wednesday [see also Risk On ETFdb Portfolio Now Available].

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 New Zealand Investable Market Index Fund (ENZL): This ETF may gap at Tuesday’s open following the overnight reaction to the latest New Zealand inflation report. Analysts are expecting for the nation’s CPI to dip down to 1.1% from its previous reading of 1.6%.
• Daily 2x VIX Short-Term ETN (TVIX): With Chairman Bernanke testifying before Congress on Tuesday, this popular instrument should see an increase in trading volumes given the heightened levels of uncertainty often times associated with such events.
• SPDR Homebuilders ETF (XHB): This ETF could be in for a wild trading day on Wednesday following the release of the latest U.S. housing starts data. Analysts are expecting for this figure to come in at 750,000, marking a modest improvement over last month’s reading of 708,000.
• Dow Jones U.S. Technology Index Fund (IYW): The domestic technology sector will be in the spotlight all week as corporate earnings roll in; however, Thursday should be particularly important as investors react to performance results from Google and Microsoft, both of which are in IYW’s top ten holdings.
• IQ Canada Small Cap ETF (CNDA): Canadian equity markets may take cues from the reaction to the nation’s latest CPI data on Friday morning. Analysts are expecting for Canada’s inflation rate to come in at 1.8%, marking a modest increase from last month’s reading of 1.2%.

Major equity benchmarks at home remain above their 200-day moving average, suggesting that the longer-term uptrend is in-tact, although the Volatility Index (VIX) may suggest a wave of profit taking could be around the corner. The VIX has a historically difficult time settling below the 16 level, which is where the index is currently floating around. Investors will keep their eyes on corporate results although the main spotlight will likely focus on commentary from Ben Bernanke, and more specifically, any mentions of additional quantitative easing.

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: Short FXA