Friday’s ETF Chart To Watch: iShares Barclays Aggregate Bond Fund (AGG)

by on January 6, 2012 | ETFs Mentioned:

Equity markets posted mixed results on Thursday as earnings worries in the morning translated into selling pressures on Wall Street, although euphoria returned to the markets after a better-than-expected employment report. The Nasdaq led the way higher in green territory on the home front, while stocks overseas faced headwinds as European banks came under pressure yet again. Gold inched higher for the fourth consecutive day this week, settling near $1,620 an ounce.

Wall Street will look to end the week on a positive note as investors turn their attention to the latest unemployment report. The iShares Barclays Aggregate Bond Fund (AGG) is our ETF to watch for today as it may experience an increase in trading volumes depending on how investors react to the latest unemployment rate [see Better-Than-AGG Total Bond Market ETFdb Portfolio]. Analysts are expecting for the monthly figure to come in at 8.7%, versus the previous reading of 8.6%.

Chart Analysis

This ETF has been in a steady uptrend with rising levels of support since recently bottoming out at $103.85 a share on 2/10/2011. Unlike equity markets which suffered through volatile, range-bound trading in 2011, AGG was able to climb steadily higher throughout the year. This ETF is one of the few products that has been consistently trading above its 200-day moving average (yellow line) over the past few months. From a fundamental perspective, AGG has been in a stellar uptrend thanks to the cloud of uncertainty stemming from Europe and looming over equity markets [see Are Gold ETFs The Best Defense Against Euro Drama?].

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This bond ETF appears poised to continue its ascent seeing as how it has managed to edge higher backed by relatively high volume over the last few weeks, whereas stocks and commodities as a whole fell victim to year-end profit taking pressures [see AGG Returns].

Outlook

If the latest unemployment rate figure beats analyst estimates, investors on Wall Street may find themselves in a buying frenzy amidst an improving economic outlook. A stock market rally would likely translate into headwinds for this fixed income fund; in terms of downside, AGG  has considerable support around $109 a share. On the other hand, if there is an uptick in unemployment, investors may flee to bonds in search of safety; in terms of upside, AGG has major resistance around the $110.50 level, given the fund’s all-time high at $111.03 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

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Disclosure: No positions at time of writing.