ETF Outlook for Thursday, June 5, 2014:
Rydex CurrencyShares Euro ETF (NYSE: FXE)
The European Central Bank (ECB) meets Thursday morning and it is widely expected that the central bank will make a few changes to their monetary policy.
The consensus is that the bank will lower its interest rate by 10 to 15 basis points from the current 0.25 percent. There is also heavy speculation that the deposit rate will be lowered into negative territory.
Other stimulus actions may also occur, as well as a change in the wording of the policy statement. All in all, it will likely be a policy shift that will affect the value of the euro. In anticipation of the meeting, FXE has dropped 2.5 percent in the last month after testing a multi-year high. The next level of support for the ETF is at the $133.20 area.
SPDR Euro Stoxx 50 ETF (NYSE: FEZ)
As the euro has been falling in the last month, the European stock market has been moving higher to the tune of two percent. FEZ hit the highest level in three years last week and has pulled back slightly over the last three trading days.
If the ETF can close above $44.50 on news from the ECB, it would be a major breakout from a technical perspective. The ETF is most heavily invested in France, Germany and Spain – three of the largest and most important economies in Western Europe.
SPDR KBW Insurance ETF (NYSE: KIE)
The niche financial sector broke out to a new all-time high Wednesday as one of its top holdings has recently rallied on takeover news. Shares of Protective Life (NYSE: PL) are up 33 percent in the last week, which has helped boost the entire sector.
When M&A news affects a stock, it typically will help its peers as investors believe there could be more takeovers in the coming months. Combine that with the fact the market has been strong and KIE is now up two percent for the year and sitting at a high.
ProShares Short VIX Short-Term Futures ETF (NYSE: SVXY)
There has been a lot of talk recently about volatility disappearing from the markets. If the CBOE Volatility Index (VIX) is used as the benchmark, then it would be tough to argue with the fact volatility is at low levels. SVXY tracks an index that measures the movement of a basket of VIX futures with a weighted settlement date of one month.
However, SVXY moves the inverse of the index it tracks and therefore low volatility and a low VIX level have been bullish for the ETF. The ETF is up 15 percent this year to its best level since it began trading in late 2011. When volatility picks back up, it will have a negative impact on the ETF.
- ETF Outlook For Tuesday, June 3, 2014 (FXI, FXE, DXJ, EWZ)
- ETF Outlook For Tuesday, May 13, 2014 (FXE, PBS, IYT, EPU, DTV, T)
- ETF Outlook for Thursday, April 24, 2014 (XLK, SOCL, ITB, FXE, AAPL, FB)
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