Earnings Jitters Are Back

by on July 9, 2012 | ETFs Mentioned:

Equity markets opened lower on Monday morning as investors fretted over rising yields on Spanish bonds, further intensifying uncertainties over the already fragile currency bloc. Profit taking pressures on the home front were also fueled by anticipation of corporate earnings season which kicks off after the closing bell today with performance results from aluminum giant Alcoa. Corporate earnings will likely receive a great amount of attention and scrutiny, as investors look for encouraging data that trumps last Friday’s dismal employment report [see also July Edition Of ETF Edge Now Available].

Weekly Outlook

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

  • Aluminum ETF (ALUM): Alcoa’s results on Monday after the bell could lead to a gap at Tuesday’s open for ALUM as this ETF tracks the performance of the largest companies in the aluminum industry. Analysts are expecting for Alcoa to deliver $5.81 billion in revenues and EPS of 6 cents.
  • Barclays 20 Year Treasury Bond Fund (TLT): Investors may find themselves jumping ship to the safe havens on Wednesday following the latest FOMC minutes. TLT could be in a for a wild trading day, especially if the Fed’s commentary further deteriorates investors’ confidence.
  • MSCI Australia Index Fund (EWA): Australian equities will come into the spotlight on Thursday morning following the most recent employment report. Analysts are expecting for the nation’s unemployment rate to creep up from 5.1% to 5.2%, which could spark a wave of profit taking overseas that spills over onto the home front.
  • SPDR S&P China ETF (GXC): This ETF may gap in either direction Friday morning following the release of the latest China GDP report. Analysts are expecting for economic growth to come in at 7.7% on a year-over-year basis compared to the previous reading of 8.1%.
  • Dynamic Retail ETF (PMR): U.S. retail stocks will come into the spotlight Friday morning as investors gain insights into the health of the recovery following the release of the latest University of Michigan confidence data. Analysts are expecting for the consumer sentiment figure to come in at 73.1 versus the previous reading of 73.2.

The Volatility Index (VIX) is back below 20 although it appears to be holding support above the 16 level; this may be interpreted as a sign that uncertainties will return to Wall Street and potentially bolster the VIX back above 18 level, or perhaps even the 20 mark. For the S&P 500 Index, resistance at the 1,380 level has yet to be re-conquered, while support comes in at the 1,310 level; a break below this level would be quite worrisome as the next major support level doesn’t come in until the 1,275 mark.

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: Short XRT 

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Disclosure: No positions at time of writing.