Bears Lurking In Uncharted Territory

by on March 11, 2013 | ETFs Mentioned:

With the Dow Jones Industrial Average climbing to all-time highs last week it’s no surprise to see the divide between the bulls and the bears reach extremes as well. While some investors are calling this the start of the next great bull-run, others are equally convinced that equities are long-overdue for a major correction. As such, the bulls continue to cite the string of upbeat economic data that has been hitting the street while the bears are eyeing the stellar run-up thus far on the year as an opportunity to profit from an imminent pullback [see also How To Hedge With ETFs].

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 S&P Retail ETF (XRT, A): U.S. retailers may be in for a volatile trading session this Wednesday as investors digest the latest sales data. Analysts are expecting for retail sales to have grown by 0.6% in February versus the previous figure of 0.1%.
  • MSCI New Zealand Investable Market Index Fund (ENZL, B): This ETF could gap in either direction Thursday morning as investors digest the overnight Reserve Bank of New Zealand rate decision. Analysts are expecting for interest rates to remain unchanged at 2.50%, although economic commentary after the decision can lead to swings in the equity market.
  • CurrencyShares Euro Currency Trust (FXE, A): The euro will come into the spotlight this Friday morning as markets react to the latest inflation data out of the currency bloc. Analysts are expecting for the region’s CPI to come in unchanged at 1.8%.
  • DB USD Index Bullish (UUP, A): Investors will also digest U.S. inflation data on Friday morning, with analysts expecting the latest CPI figure to come in at 1.8%, marking a slight increase over last month’s reading of 1.6%.

The stock market’s uptrend has demonstrated great resilience since the start of 2013 as every pullback has welcomed new buyers, despite the impressive gains since the November 16th lows last year. With no major economic data releases slated to take place this week, markets may find themselves drifting sideways and easily swayed by headlines. From a technical perspective, the S&P 500 Index has immediate support around 1,525 along with major resistance near the 1,570 mark.

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 FXA

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Disclosure: No positions at time of writing.