The bulls returned to Wall Street last week as the European Central Bank finally quenched the stimulus hopes of many. President Draghi announced the “open monetary transactions” plan which aims to ensure the financial stability of debt burdened member nations by giving the ECB flexibility when it comes to buying government bonds. This effort was well received all over the globe and the pressure is now on Chairman Bernanke to act; investors will keep a close watch on the Fed press conference this Thursday in hopes of an additional round of stimulus on the home front [see also ETF Technical Trading FAQ].
Below, we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:
- WisdomTree Dreyfus Chinese Yuan Fund (CYB): Markets overseas could experience volatile trading overnight as the latest China new yuan loans data comes out. CYB could gap in either direction Tuesday morning; analysts are expecting for $600 billion in new loans versus the previous reading of $540 billion.
- Rydex CurrencyShares Euro Currency Trust (FXE): The euro will come into focus on Wednesday morning as the European Union announces details regarding the proposed banking union. German CPI data may also tip the currency in either direction; analysts are expecting for inflation to come in unchanged at 2%.
- iShares MSCI New Zealand Investable Market Index Fund (ENZL): This ETF may experience a volatile open on Thursday morning following the overnight reaction to the Reserve Bank of New Zealand interest rate decision. Analysts are expecting for the benchmark rate to remain steady at 2.5%, however, the economic commentary issued after the rate decision itself will likely offer more insights and potentially increase trading volumes for ENZL on the day.
- State Street SPDR Gold Trust (GLD): The precious yellow metal could become the center of attention on Thursday if Chairman Bernanke leaves markets hanging onto stimulus hopes. The FOMC rate decision will surely come under criticism following the ECB’s commitment last week to continue its massive bond-buying initiative.
The S&P 500 Index has crossed major resistance and the benchmark now sits at highs for 2012. Traders should be aware however that the Volatility Index has retraced back below the 15 mark, and as such, it may be due for a bounce higher which could spark a brief correction on Wall Street. For the S&P 500 Index, near-term support comes in at the 1,400 level, while a break below this level would likely welcome accelerating selling pressures. Gold will also come into the spotlight this week as the precious metal looks to hold its head above $1,700 an ounce and resume its longer-term uptrend.
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 DXJ
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Disclosure: No positions at time of writing.