China growth fears and earnings jitters will remain key themes this week as investors look to decipher fundamental data releases, both at home and abroad, amid the bull market on Wall Street. In Europe, news of Giorgio Napolitano staying in office spurred a confidence rally in the bond market, although the eurozone as a whole still remains on edge as evidenced by the euro’s weakness in the currency market [see also How To Take Profits And Cut Losses When Trading ETFs].
Below, we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:
- Industrial Select Sector SPDR (XLI, A): Durable goods data due out this Wednesday will put the industrial sector in focus. Analysts are expecting for this monthly figure to show a contraction of 3.2% compared to the previous reading of positive 5.6%.
- MSCI New Zealand Investable Market Index Fund (ENZL, A-): This ETF will take cues from the overnight Reserve Bank of New Zealand’s interest rate decision. Although analysts are expecting for the rate to remain steady at 2.50%, economic commentary after the rate decision itself could lead to volatile trading for ENZL on Wednesday.
- CurrencyShares Japanese Yen Trust (FXY, C+): The yen could see volatile trading on Friday morning as investors react to the overnight Bank of Japan rate decision. Analysts are expecting for the rate to remain unchanged at 0.10%, although economic commentary following the rate decision itself is sure to inspire some choppy trading in the currency market.
- Dow Jones Industrial Average ETF (DIA, A): On Friday, U.S. equity markets will likely take cues from the latest GDP report. Analysts are expecting for economic growth to come in at 3.2% versus the previous reading of 0.4%.
From a technical perspective, the uptrend on Wall Street remains fully in-tact; last week’s sell-off was short-lived and bargain buyers stepped in ahead of a key support level for the S&P 500 Index. Despite lingering China growth fears and looming eurozone debt drama, confidence on Wall Street remains elevated as economic data continues to come in largely better-than-expected. Corporate earnings have also helped to pave the way higher thus far, although volatility could return as more bellwethers report over the coming days. For the S&P 500 Index, support comes in at 1,540-1,520, while resistance lies around the 1,600 level.
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 XLK
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Disclosure: No positions at time of writing.