Will The Bears Crash Earnings Season?

by on April 9, 2012 | ETFs Mentioned:

After taking a dip lower last week, equity markets will look to shake off profit taking pressures and resume the bull-run on Wall Street. With corporate earnings season on tap to kick-off with Alcoa on Tuesday, investors will have platefuls of fresh economic data to digest throughout the trading week. In international developments, the China GDP release towards the end of the week will surely attract plenty of attention as investors look to gain insights into the health of the growing Asian behemoth. 

Weekly Outlook

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

  • CurrencyShares Japanese Yen Trust (FXY): This ETF could gap in either direction on Wednesday morning depending on currency market volatility following the latest Bank of Japan rate decision. Analysts are expecting for the interest rate to remain unchanged at 0.10%, although economic commentary following the decision could provide more insights. 
  • IndexIQ Australia Small Cap ETF (KROO): Australian equities could stage a volatile reaction on Thursday morning following the latest employment data release. Analysts are expecting for the national unemployment rate to increase to 5.3% from the previous reading of 5.2%. 
  • iShares FTSE China 25 Index Fund (FXI): This ETF could see an increase in trading volumes on Friday morning depending on the latest China GDP results. Analysts are expecting for economic giant to post GDP growth of 1.9% for the quarter, versus the previous reading of 2.0%. 
  • Market Vectors Germany Small Cap ETF (GERJ): Germany equities could experience volatile trading on Friday morning depending on how investors react to the latest CPI report. Analysts are expecting for inflation to remain unchanged at 2.1%, although a surprise result could tip markets in either direction. 
  • SPDR S&P Retail ETF (XRT): The domestic retail sector will come into focus on Friday morning as the latest University of Michigan confidence survey results hit the street. Analysts are expecting for the sentiment figure to come in unchanged at 76.5, while a surprise to the upside could certainly help spark a rally in XRT. 

Given the impressive run-up on Wall Street thus far in 2012, this earnings season will prove to be vital in sustaining optimism and helping to keep the bullish momentum alive. Nonetheless, broad-based equity benchmarks are at a technical crossroads, resting on support levels at the start of the week, although a deeper correction could easily develop if economic data and earnings results paint a concerning outlook. 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 EWG

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Disclosure: No positions at time of writing.