ETF Outlook for the Week of October 21, 2013 (TLT, USO, ITB, CUT)
ETF Outlook for the week of October 21, 2013.
iShares 20+ Year Treasury Bond ETF (NYSE: TLT)
The September jobs report, which was delayed due to the government shutdown, will be released Tuesday. The market expects the number to come in around 180k, slightly higher than the previous month.
With the market pricing in a longer delay until the Fed begins to taper, the jobs number will either reiterate that thought or could put a damper on the bulls. As far as bonds, if the number is inline or worse than expected TLT should continue to rise because interest rates will likely stay low for the foreseeable future. And vice versa.
United States Oil ETF (NYSE: USO)
Stocks are hitting highs, bonds are increasing in value, but oil has had trouble attracting buyers. The price of oil has fallen as the geopolitical tensions around the world have disappeared from the headlines and the government shutdown did not help.
The question is whether the weakness is a buying opportunity or a sign to stay away from the commodity. From a technical perspective, USO has important support between $35 and $36. If the ETF can hold the support zone it could be a buying opportunity for investors.
iShares Dow Jones US Home Construction ETF (NYSE: ITB)
A big week for housing numbers with the existing home sales on Monday and new home sales on Thursday will have the housing stocks on the move. ITB is made up of about two-thirds home builders and the remainder housing-related stocks.
A rise in mortgage rates and the government shutdown has not been kind to the sector. That being said the ETF has held support near $20.50 and if the numbers are strong it could lead to buyers picking up shares on the 5-month pullback.
Rydex CurrencyShares Euro ETF (NYSE: FXE)
The euro was up one percent last week and closed 0.1 percent below a high set in early February. A close this week above $135.49 would put the ETF at the best level since November 2011 and would signal an important breakout.
The weakness in the U.S. dollar has had a direct affect on the relationship with the Euro and all foreign currencies. If the Fed continues to hold off on the taper it will be bearish for the greenback and will help push the euro higher.
ETF of the Week – Guggenheim Timber ETF (NYSE: CUT)
A big week for the timber-related stocks pushed CUT up 3.25 percent and to the best level since December 2007. There could be several reasons as to why the ETF outperformed the overall market last week, but two in particular stand out. The fact the government shutdown cost the economy $240 billion puts pressure on the Fed to continue their accommodative policies.
The further tapering gets pushed back, the higher probability of inflation in the near future. Timber stocks tend to do well in inflationary environments. The second reason has to do with the stocks hitting highs and investor confidence. This may lead to a pickup in the housing sector which would result in more demand for timber.
Technically the stock is very bullish, however waiting for a pullback to $25.00 would be the best strategy versus chasing a new multi-year high.
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