ETF Insider: Flirting With Resistance Is A Risky Game

Stoyan Bojinov

Low trading volumes and sparse data releases have been recurring themes over the past two weeks, letting the bulls coast higher without much effort. The headlines are back this week however, and hopefully more traders from vacation, as a number of key GDP releases from the Europe are expected to come into the spotlight. The technical picture remains unchanged; the S&P 500 Index is flirting with historical resistance right around the 1,420 level [see also ETF Technical Trading FAQ].

Weekly Outlook

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

  •   iShares MSCI Germany Index Fund (EWG): German GDP is slated to come out before Tuesday’s opening bell, which brings the focus onto EWG as investors react to the latest economic growth reading from the powerhouse Euro zone member. Analysts are expecting for GDP to come in at 0.9% versus the previous reading of 1.7%.
  • CurrencyShares British Pound Sterling Trust (FXB): The pound could experience volatile trading in the currency market following the release mentioned above, as well as from the reaction to the latest inflation reading. British CPI is expected to come in at 2.3% versus the last reading of 2.4%. 
  • iShares MSCI EMU Index Fund (EZU): Euro zone member nations included in this ETF will come into the spotlight before Tuesday’s open as well given the scheduled Euro zone GDP release. Analysts are expecting for economic growth come in at -0.2% in the debt-burdened region versus the previous reading of 0%. 
  • Vanguard Consumer Discretionary ETF (VCR): Domestic consumer discretionary stocks will come into focus at the opening bell on Tuesday as investors digest July retail sales data. Analysts are expecting for this figure to come in at 0.3% versus the previous reading of -0.5%. 

The Volatility Index managed to tick lower last week as the lack of major data releases served to welcome back optimism. The VIX however is currently near its previous low at 13.66, from which it bounced back higher over the course of the next month back in mid-March of this year. The bull trend remains in tact on the equities front, although profit taking pressures should be expected to make at least a short-lived appearance.

Below, we have highlighted three fundamental 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 XRT
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Disclosure: No positions at time of writing.

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