Is Euro Zone Optimism Here To Stay?

by on February 13, 2012 | ETFs Mentioned:

Last week’s bull-run on Wall Street came to a halt screeching halt on Friday as investors expressed their concerns over the looming, unresolved Euro zone debt crisis. Greek leaders and European policymakers have been battling it out in the negotiations room, although it appears that the drama may be nearing a climax as the debt burdened nation has begun to accept the proposed austerity measures in an effort to avoid default. With earnings season out of the spotlight, investors will once again have their eyes and ears fixed on developments in the overseas currency bloc.

Weekly Outlook

The coming week will be fairly light on central bank meetings, although several CPI releases will take place. Below, we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:

  • CurrencyShares British Pound Sterling Trust (FXB): This ETF could gap on Tuesday morning if the latest U.K. CPI report surprises investors; analysts are expecting for inflation to come in at 3.6% year-over-year, versus the previous reading of 4.2%.
  • State Street SPDR S&P Retail (XRT): Retail stocks will come into focus on Tuesday morning as the latest sales figures hit the street. Analysts are expecting for January retail sales to have grown by1 %, a modest increase from the previous reading of 0.1%.
  • iShares MSCI EMU Index Fund (EZU): This Euro zone ETF may experience increased trading volumes on Wednesday as investors react to the latest economic growth data from the region. Analysts are expecting for the currency bloc’s GDP to come in at 0.7% year-over-year, versus the previous reading of 1.4%.
  • State Street SPDR Homebuilders ETF (XHB): This ETF could experience volatile trading on Wednesday depending on the latest home builders index; analysts are expecting for the figure to come in at 26, a slight increase from the previous reading of 25.
  • iShares Barclays Aggregate Bond Fund (AGG): This bond ETF may take on safe haven appeal on Thursday if investors are unhappy with the latest jobless claims report. Analysts are predicting that 368,000 people have filed for unemployment benefits, versus 358,000 previously.
  • PowerShares DB USD Index Bullish (UUP): The U.S. dollar could experience volatile trading in the currency markets following the latest inflation report on Friday morning. Analysts are expecting for CPI to come in at 2.8%, a slight downtick from the previous reading of 3%.

The Greek debt tragedy appears to be nearing an end as policymakers have begun to accept the terms of the necessary bailout. Although the drama has been simmering down, it won’t be much of a surprise to see uncertainty resurface when investors least expect it, seeing as how this frustrating ordeal has gone on since July of last year. 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: Short PIO

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Disclosure: No positions at time of writing.