Gridlock And Optimism Sway Stocks

by on December 11, 2012 | ETFs Mentioned:

Price action has been undeniably positive over the last few weeks on Wall Street, however, with no real progress being made in regards to the “fiscal cliff” it won’t be terribly surprising to see stocks take a nasty tumble at the first sign of worrisome headlines. Despite the largely unchanged fundamentals on the home front, investors overseas are seeing some glimmers of hope; China factory output and retail sales made a comeback while German economic sentiment also beat expectations [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 Gold Trust (GLD, A-): Gold could be in for a volatile trading session on Wednesday as investors digest the latest FOMC statement after the opening bell. While the benchmark rate is expected to remain unchanged, economic commentary issued by the Fed Chairman could sway stocks on the day.
  • Market Vectors Retail ETF(RTH, B+): Domestic retail stocks will come into the spotlight on Thursday as investors digest November retail sales data. Analysts are expecting for the retail sales figure to have expanded by 0.4%, marking a noteworthy improvement from the previous reading of -0.3%.
  • CurrencyShares Euro Currency Trust(FXE, A): The euro may experience volatile trading in the currency market after the latest CPI data for the currency bloc hits the street on Friday morning. Analysts are expecting for Euro zone inflation to come in unchanged at 1.5%.
  • DB USD Index Bullish (UUP, A): The U.S. dollar may be in for a volatile trading session on Friday as well given that U.S. CPI data will hit the street just a few hours after European markets react. Analysts are expecting for inflation to come in at 1.9%, marking a slight dip from the previous reading of 2.2%.

The S&P 500 Index has remained very resilient and capable of holding its head above the 200-day moving average despite the laundry list of economic uncertainties plaguing investors’ confidence. From a technical perspective, this benchmark faces potential resistance around the 1,440 level before it can retest the 1,470 mark, while immediate support comes in at 1,400.

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 IXP

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Disclosure: No positions at time of writing.