Bulls Look To Stampede Over Euro Drama

by on November 7, 2011 | ETFs Mentioned:

Financial markets saw a whirlwind of activity last week as Euro zone debt woes swayed investor sentiment from euphoric to fearful. Equity markets came under serious selling pressures after news of a Greek referendum reignited default fears. Confidence in the currency bloc quickly returned however as the Greeks rescinded their referendum and bullish investors were quick to pile into equity markets following the sell-off the day before. The European Central Bank interest rate cut further bolstered markets higher as investors were happy to see the ECB taking preemptive measures to ensure financial stability in the debt burdened region. Gold worked its way higher amidst the continuing uncertainty, and the precious metal closed right around $1,760 an ounce for the week.

Weekly Outlook

The coming week is quite sparse of economic data releases both at home and on the international front. Stock markets will likely continue to take cues from the Euro zone as investors await for a comprehensive rescue plan. Below, we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:

  • Market Vectors-Chinese Renminbi/USD ETN (CNY): China’s CPI is expected to be released on Tuesday night possibly leading to increased trading volume in CNY on Wednesday morning. Analysts are expecting for inflation to decline to 5.4% from previously 6.1%.
  • MSCI Australia Index Fund (EWA): As this fund tracks the Australian equity market, the Australia unemployment data will provide some insight on the direction of its economy. With the data to be released Wednesday evening, investors could see a gap in EWA when the market opens on Thursday morning. Analysts are forecasting for the unemployment rate to come in at 5.3%.
  • Market Vectors Germany Small-Cap ETF (GERJ): Analysts expect the German CPI to remain the same as the previous release at 2.5%. GERJ may experience some volatility as investors digest the latest inflation data.
  • MSCI EMU Index Fund (EZU): The focus is still on Europe as investors await for the ECB to publish its November Monthly Report on Thursday. EZU might experience some volatility depending on whether or not the ECB report is more cautious of the economic outlook for the region.
  • CurrencyShares British Pound Sterling Trust Profile (FXB): The Bank of England interest rate decision is slated for Thursday and analysts are projecting for the rate to remain constant at 0.50%. Investors should pay attention to the details of the commentary released after the interest rate decision itself to gain a better idea on the economic condition of the country.
  • S&P 500 VIX Short-Term Futures ETN (VXX): VXX may experience some heavy volumes of trading volumes as the U.S. University of Michigan Confidence report is released on Friday. Investors may find themselves piling into equity markets if U.S. consumer confidence comes in better-than-expected.

Domestic equity markets have staged a resilient comeback over the past month as investors’ confidence in the economic recovery has improved. Better-than-expected durable goods data, a strong third quarter GDP report, and improving labor and housing market statistics have all paved the way higher for U.S. stocks. However, headwinds from the Euro zone remain quite strong as debt negotiations in the currency bloc dominate news headlines and contribute to volatile trading. Below, we have highlighted some technical 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 JXI

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