The bull train continued its ascent on Wall Street last week as profit taking pressures were short-lived amid the improving economic outlook. Worrisome GDP results did manage to spook some, however, market sentiment overall remains undeniably bullish as each minor pullback has welcomed eager buyers [see 3 Economic Charts Bears Love To Ignore].
This week will remain busy as earnings season continues on the home front although the lack of major economic data releases could rattle the ongoing streak of confidence. Trading activity will be bustling overseas as several key central bank rate decisions are slated to take place later in the week.
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 may gap tomorrow morning as investors react to the overnight Reserve Bank of Australia rate decision. Analysts are expecting for the interest rate to remain unchanged at 3.00%, although economic commentary issued after the decision may spark volatile trading.
- MSCI United Kingdom Index Fund (EWU, A): British stocks could be in for a big trading day on Thursday as investors’ digest the latest rate decision from the Bank of England prior to Wall Street’s opening bell.
- CurrencyShares Euro Currency Trust (FXE, A): The euro will come into the spotlight on Thursday morning as well after the European Central Bank rate decision takes place. Analysts are expecting for the rate to remain steady at 0.75%, although hints of future policy changes could ignite volatile trading in the currency market.
- SPDR S&P China ETF (GXC, A-): Chinese equity markets will likely take cues from Thursday’s CPI release. FXI may gap in either direction Friday morning, depending on the latest inflation reading; analysts are expecting for China’s CPI to come in at 2.1% versus the last reading of 2.5%.
Last week was fairly uneventful from a technical perspective as the major equity markets generally stuck to the same price pattern; buying pressures were quick to sweep in after every minor pullback on Wall Street, showcasing investors’ bullish sentiment The S&P 500 Index continued its bull run and posted fresh 5-year highs while the Nasdaq continues to lag behind thanks to Apple’s lackluster performance. The Volatility Index spiked early in the week past the 14 mark, however, this had minimal impact on the equity market, further showcasing investors’ confidence in the ongoing rally which has gone on largely uninterrupted since the start of 2013.
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 UUP
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Disclosure: No positions at time of writing.