ETF Insider: Buy On The Dip With Caution

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Worse-than-expected employment data on the home front brought back the bears onto Wall Street last week, however, buyers still piled into equities before the weekend as bull market euphoria remains the dominant theme. The bulls will look to resume their ascent this week as tensions in the euro zone have cooled off with Russia accepting the Cyprus loan restructure, while Portugal has pledged to increase its push for austerity [see also How To Swing Trade 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 China ETF (GXC, A): This ETF may swing in either direction at Tuesday’s opening bell as investors react to the overnight China CPI report. Analysts are expecting for China’s inflation rate to come in at 2.5%, which would  mark a substantial decrease from its previous reading of 3.2%.
  • SPDR Gold Trust :  Wednesday’s FOMC minutes could inspire further selling pressures in the gold market if the the Chairman expresses an upbeat economic outlook.
  • S&P 500 VIX Short-Term Futures ETN (VXX, B+):  Volatility levels will come into focus again after the weekly jobless claims report on Wednesday. Analysts are expecting for this figure to come in at 360,000, which would mark a healthy improvement from last week’s reading of 385,000.
  • Market Vectors Retail ETF (RTH, A):  U.S. retailers could be in for a volatile trading session this Friday as investors digest the latest retail sales data. Analysts are expecting for March sales to post a decrease of 0.1% versus last month’s positive reading of 1.1%.

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Volatility

Last week’s sell-off was concerning, but ultimately it panned out as every other pullback in recent months; major domestic equity indexes managed to hold at key support levels and bargain buyers jumped aboard ahead of the weekend in anticipation that the uptrend would resume this week. Fundamentally, the landscape remains largely unchanged even after last week’s disappointing labor market data although economic commentary from Chairman Bernanke later this week could inspire further profit taking if pessimism resurfaces.

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 IWM

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Disclosure: No positions at time of writing.

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