The Ascent Continues

by on January 22, 2013 | Updated January 23, 2013 | ETFs Mentioned:

Bearish sentiment has been all talk since the start of the new year as made evident by the ongoing bullish price action seen across equity markets. While many were expecting for corporate earnings to serve as a nasty reminder of the slow recovery at hand, quite the opposite has proved true thus far as financial bellwethers have been reporting upbeat results. The spotlight will remain fixated on the corporate earnings front this week as well as several tech giants make the scene, including reports from Apple (AAPL) and Google (GOOG) [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:

  • SPDR Homebuilders ETF (XHB, A+): Homebuilders stocks will likely make an appearance in headlines on Wednesday as investors digest the latest FHFA home price index data.
  • CurrencyShares Canadian Dollar Trust (FXC, A): The Canadian loonie may experience volatile trading in the currency market tomorrow morning as the Bank of Canada rate decision takes place. Analysts are expecting for the rate to remain at 1.00%, however, economic commentary issued after the rate decision should offer further insights.
  • MSCI United Kingdom Index Fund (EWU, A): British equity markets will likely take cues from the nation’s latest GDP report slated to come out on Friday morning. Analysts are expecting for U.K. economic growth to come in at 0.2% year-over-year, marking a minimal improvement.
  • Canada Bond Index Fund (CAD, B): Canadian bonds will come into focus on Friday morning before Wall Street’s opening bell as investors digest the latest consumer price index data. Analysts are expecting for Canada’s inflation to come in at 1.2%, marking a healthy jump from the previous reading of 0.8%.

The S&P 500 Index is sitting on 5-year highs as the benchmark was able to pierce above previous resistance at 1,475 and settle past the 1,480 level last Friday. With the Volatility Index, VIX, trading below the 14 mark it shouldn’t come as much of a surprise to see profit taking pressures in the near-term as shorter-term investors have plenty of reasons to take money off the table given the S&P 500′s steep run-up since 12/31/2012. While it’s certainly true that stocks can continue to grind higher for weeks even months to come, a correction can be very healthy and quite necessary as profits are digested and new buyers are enticed to step-in.

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 PCY

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Disclosure: No positions at time of writing.