Stocks Await Guidance From Election, Bank Rate Decisions

by on November 5, 2012 | ETFs Mentioned:

After enduring a sour finish to a shortened trading week, investors’ stress level has only climbed higher over the weekend in anticipation of the major events that are slated to take place this week. At home, all eyes are on Obama and Romney ahead of voting, with many anticipating a volatile reaction on Wall Street given expectations of an extremely close race. On the international front, interest rate decisions from Australia, the Bank of England, and the European Central Bank will keep investors on their toes [see Free 7 Simple & Cheap All-ETF Portfolios].

Weekly Outlook

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

  • CurrencyShares Australian Dollar Trust (FXA, A-): The Aussie dollar ETF could see a volatile open tomorrow as markets digest the overnight interest rate decision. Analysts are expecting for the Reserve Bank of Australia to cut rates to 3.00% from 3.25%.
  • S&P 500 VIX Short-Term Futures ETN (VXX, A-): Wild trading on Wednesday shouldn’t come as much of a surprise as investors on Wall Street will likely be digesting the 2012 presidential election results.
  • European ETF (VGK, A+): European markets will come into the spotlight Thursday morning as investors around the globe react to the latest interest rate decisions from the Bank of England as well as the European Central Bank. Analysts are expecting for British and Euro zone rates to hold steady at 0.50% and 0.75% respectively.
  • SPDR S&P Retail ETF (XRT, A): Retail stocks may receive a much needed fundamental catalyst to propel the sector higher on Friday following the latest consumer sentiment data. Analysts are expecting for the latest confidence figure to come in at 81.5 versus the previous reading of 82.6.

The shortened trading week was quite uneventful in retrospect on Wall Street. Markets resumed trading on Wednesday without any major swings, only to falter on Friday and end in red territory ahead of this data-packed week. Given last weeks sideways price action, key technical levels for the S&P 500 Index remain unchanged; major support lies at the 1,400 level while resistance comes in around the 1,440 mark.

Below, we have highlighted three 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 XLE

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Disclosure: No positions at time of writing.