More Earnings, More Volatility

by on April 16, 2012 | ETFs Mentioned:

With Euro zone debt woes creeping back onto Wall Street last week, investors were reminded of the looming challenges that will continue to pose headwinds for the currency bloc in the foreseeable future. Nonetheless, from a technical perspective, the longer-term uptrend in broad equity indexes including the S&P 500, Dow Jones Industrial Average, and Nasdaq remains in-tact; if these benchmarks tumble past last week’s lows, however, then there is a great possibility that a major correction will unfold, perhaps eating away most of this year’s gains [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:

  • Financial Select Sector SPDR (XLF): This ETF could see major swings in price throughout the week as two bellwether financial firms report earnings results; Goldman Sachs is slated to release performance results on Tuesday followed by Bank of America on Thursday. 
  • Dow Jones U.S. Home Construction Index Fund (ITB): This sector-specific ETF could see an increase in trading volumes on Tuesday as investors react to the latest housing market data; U.S. housing starts in March are expected to come in at 703,000 versus the previous reading of 698,000.
  • Vanguard Consumer Staples (VDC): This sector-specific ETF is also poised to have a busy trading week as several top components are slated to report earnings, including Coca-Cola and Philip Morris International; these two industry giants are slated to report on Tuesday and Thursday respectively.
  • MSCI New Zealand Investable Market Index Fund (ENZL): This ETF may experience volatile trading on Thursday depending on the market’s reaction to latest national inflation data; analysts are expecting New Zealand’s CPI to come in at 1.6% versus the previous reading of 1.8%.
  • CurrencyShares Canadian Dollar (FXC): The Canadian dollar could see heavy trading in the currency market on Friday as investors digest the latest CPI report; analysts are expecting for the inflation rate to come in at 2.1% versus the previous reading of 2.6%.

After a dismal performance last week, equity market bulls will look to swoop in at attractive levels, however, better-than-expected corporate earnings will be necessary to sustain optimism. As always, lingering Euro zone debt woes could resurface and spark a broad sell-off at virtually any moment. Below, we have highlighted three 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 EMLC

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Disclosure: No positions at time of writing.