Analyst Notes & Portfolio Review July 31st Edition

by on July 31, 2013 | ETFs Mentioned:

U.S. equity indexes remain near all-time highs as largely upbeat corporate earnings and a lack of “bad news” from overseas markets have given investors few reasons to sell amid the euphoria. Furthermore, investors’ confidence was bolstered by the latest GDP report, which showed economic growth of 1.7%, considerably better than the previous reading of 1.1% [see also The Complete Visual History Of SPY].

Heard on the Street

The biggest developments to take place in July have all revolved around the Fed “taper scare” from June 22nd. Fed officials, including Chairman Bernanke himself, were quick to “soften” their language and reassure investors that monetary policy will remain accommodative until economic data warrants a policy shift. The bulls jumped back on board and the rally has resumed on Wall Street, although the FOMC meeting in September may re-ignite fears as investors again weigh the possibility of a stimulus reduction. Overseas, the landscape remains largely unchanged; China’s slow growth continues to suppress commodity prices while the eurozone’s grim outlook has taken its toll on corporate earnings at home [see ETF Plays As The End Of QE Nears].

For a technical perspective, consider the S&P 500 ETF (SPY) chart below:

SPY

Click to Enlarge

From a big-picture perspective, the uptrend on Wall Street remains largely unchanged; the bulls are clearly in control as each correction has been short-lived and followed by bargain shoppers still eager to get a piece of the action. What is potentially worrisome is that SPY may be forming something of a crude double-top. Notice how this ETF remained in a channel (red lines) since the start of 2013; however, the recent correction re-tested support at $155, a level not seen since April. SPY has resumed its uptrend, however, and it is now clearly stalling at the same resistance level around the $170 mark. Any sharp move to the downside below $167 a share can welcome accelerating selling pressures that may take SPY to anywhere from $165 to $155 over the comings weeks.

ETF Insider Portfolio Highlights

The ETF Insider Portfolios is made up of actionable investment ideas that our team of experts believes are poised for outperformance over the next 30 to 90 days. Based on our current reading of macroeconomic conditions, we offer relevant investment ideas that stand to benefit from the prevailing market sentiment.  To get access to all ETF Insider recommendations, sign up for a free 14-day trial of ETFdb Pro.

New Positions

Click on “ETF Insider” to see our investment rationale behind each new position.

New Recommendations
Ticker Position Date Recommended
ETF Insider

Long

7/30/2013

This month we added a small cap ETF to our All-ETF portfolio in anticipation of a major trend reversal over the coming weeks. The new position is geared towards investors with a stomach for risk as it focuses on overseas markets that are infamous for their volatility; likewise, the profit potential here is tremendous as outlined in our investment rationale behind the recommendation.

Recently Closed Positions

Below is a list of our most recently closed positions:

Ticker ETF Position Date Closed Price Gain (Loss)
XLU Utilities Select Sector SDPR Long 5/16/2013 $40.00 +8.8%
AUNZ  Australia & New Zealand Debt Fund Long 5/31/2013 $21.00 -6.5%
EWA  MSCI Australia Index Fund Long 5/22/2013 $26.25 -1.5%
GLD SPDR Gold Trust Long 6/20/2013 $125.22 -4.3%

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.