Bearish Pressures Mounting

by on January 14, 2013 | Updated January 18, 2013 | ETFs Mentioned:

As the bull parade continues on Wall Street, bearish pressures are mounting right around the corner with major equity indexes sitting on hefty gains since the new year began. After muted activity last week, economic data releases return to the home front this week alongside more earnings results from industry bellwethers, including Goldman Sachs, Ebay, and General Electric. Pessimistic commentary from U.S. multinational large caps is likely to encourage profit taking, however, from a technical perspective any pullback presents a buying opportunity [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:

  • Market Vectors Retail ETF (RTH, B+): With U.S. retail sales slated to hit the street on Tuesday morning, the domestic sector will come under the spotlight and RTH could see an uptick in trading activity. Analysts are expecting for this figure to show growth of 0.2% versus last month’s reading which posted growth of 0.3%.
  • Barclays TIPS Bond Fund (TIP, A-): Inflation-protected securities will be in focus on Wednesday morning as investors digest the latest U.S. consumer price index data. Analysts are expecting for year-over-year inflation to remain unchanged at 1.8%.
  • Dow Jones U.S. Home Construction Index Fund (ITB, A): Homebuilders could experience volatile trading on Thursday depending on December’s housing starts data. Analysts are expecting for this figure to come in at 883,000, marking a modest increase from the previous reading of  861,000.
  • SPDR S&P China ETF (GXC, A+): This ETF may gap in either direction Friday morning as investors react to the overnight China GDP report. Analysts are expecting for the Chinese economy to have expanded by 7.8% year-over-year, versus the previous reading of 7.4%.

The S&P 500 Index continues to demonstrate resilience as it has managed to hold onto its gap since the start of the year. Although it appears to be building out rising support from the 1,455 level, the S&P 500 Index is still facing major resistance around the 1,475 mark. From a technical perspective, the equity index appears to be at a sweet spot so to say; any move to the downside beneath 1,450 will likely lead to a deeper correction with major support coming in around 1,400. Likewise, continuing positive fundamental catalysts can encourage the market to breakout higher and blow right past resistance at 1,475.

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 SIL

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Disclosure: No positions at time of writing.