Gear Up For Turbulence

by on April 23, 2012 | ETFs Mentioned:

Investors got an unfriendly reminder of the looming Euro zone debt woes last week as resurfacing fears surrounding rising yields on Spanish government bonds paved the way for profit taking across the board. Earnings season at home remains a “mixed bag” judging by Wall Street’s movement last week, although surprises have been predominantly upbeat. As such, we anticipate for volatility levels to remain elevated across equity markets this week as earnings season continues full steam ahead, coupled with a plateful of important economic releases including GDP as well as an FOMC announcement [see Free Report: How To Pick The Right ETF Every Time].

Weekly Outlook

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

  • SPDR Homebuilders ETF (XHB): This ETF could see major swings in price throughout the week as a number of housing data releases hit the street, including Case-Shiller home price index on and new home sales on Monday, as well as pending home sales on Thursday.
  • Market Vectors Retail ETF (RTH): U.S. retail stocks may bolster this ETF higher on Tuesday if the latest consumer confidence data ignites a rally; analysts are expecting for the figure to come in at 70, versus April’s reading of 70.2
  • Vanguard Industrials Index Fund (VIS): This sector-specific ETF could see an increase in trading volumes on Wednesday as investors digest the latest durable goods orders data; analysts are expecting for the figure to come in at -2.9%, versus the 2.4% reading last month.
  • S&P 500 VIX Short-Term Futures ETN (VXX): Volatility levels are likely to remain escalated this week, and especially on Wednesday afternoon following the FOMC announcement as well as Ben Bernanke’s press conference. VXX could see a big swing to the upside if uncertainty leads to panic selling.
  • UltraShort Barclays 20+ Year Treasury (TBT): This popular inverse Treasury ETF could see a massive rally on Friday if an upbeat U.S. GDP report sparks a sell-off across safe haven assets. Analysts are expecting for economic growth to come in at 2.7% versus the previous reading of 3.0%.

After another shaky week for stocks, we feel its prudent to position ourselves for more volatility. However, we still feel that equity market exposure is well worth the risks, considering that major indexes are still above key technical support levels. 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 FUD

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Disclosure: No positions at time of writing.