Bears Are Lurking

by on September 24, 2012 | ETFs Mentioned:

The grind continues on Wall Street as pre-election jitters at home coupled with the ongoing gridlock in the Euro zone have done little for restoring investors’ confidence. Markets will look to recoup last week’s shallow losses as trading activity is expected to pick up around major economic data releases; on the home front, U.S. GDP will steal the spotlight while European headlines should be expected to take precedence given the looming uncertainties still plaguing the currency bloc [see Free Report: How To Pick The Right ETF Every Time].

Weekly Outlook

Below, we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:

  • State Street SPDR S&P Retail ETF (XRT): The consumer discretionary sector, and retail stocks in particular, will come into focus Tuesday morning as investors digest the latest confidence data. Analysts are expecting for the consumer confidence index to come in at 65 versus the previous reading of 60.6.
  • iShares Dow Jones U.S. Home Construction Index Fund (ITB): This ETF could experience volatile trading following the release of the latest housing data on Wednesday. Analysts are expecting for new home sales to come in at 380,000 versus the previous reading of 372,000.
  • Rydex CurrencyShares British Pound Sterling Trust (FXB): The British pound may encounter headwinds in the currency market following the latest GBP economic growth reading. Analysts are expecting for Britain’s GDP to have contracted by 0.5%, unchanged from its previous quarterly reading.
  • Vanguard Industrials ETF (VIS): Well-known U.S. industrial stocks should receive plenty of attention from traders and investors alike this week as GDP and durable goods figures are expected to come out Thursday morning. Analysts are expecting for economic growth to come in at 1.7%, while durable goods are expected to show a contraction of 5%.

The S&P 500 Index has managed to keep afloat above the 1,450 level while economic headlines have remained mixed at best. With the Bank of Japan beefing up its own asset purchase program, investors can now feel confident that central banks around the globe are committed to ensuring financial stability. At the same time however, inflation worries are brewing along with the fact that European leaders remain split on just how to begin oversight of the banking sector. With the Volatility Index (VIX) creeping below the 15 mark, it wouldn’t come as much of a surprise to see a quick, steep sell-off on Wall Street this week as more investors digest profits from the run-up which has been going on since early June of this year.

Below, we have highlighted three fundamental 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 VNQ

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Disclosure: No positions at time of writing.