ETF Outlook for Wednesday, December 4, 2013 (FXC, VXX, USO, ILF)
ETF Outlook for Wednesday, December 4, 2013
Rydex CurrencyShares Canadian Dollar ETF (NYSE: FXC)
The Bank of Canada will announce their decision on interest rates this morning at 10:00 am ET. The expectation is that the BOC will hold interest rates at 1.0 percent. The rise of the U.S. Dollar and the weakness of currencies based on economies with exposure to commodities have driven down the loonie.
A Fed taper would cause a boost in the value of the greenback, thus hurting foreign currencies such as the Canadian Dollar. Today’s meeting should be uneventful as most analysts do not believe the BOC will raise rates until 2015. The ETF hit the lowest level since October 2011 yesterday before a late day rally helped mitigate losses.
iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX)
Six sessions without a loss for VXX as market volatility once again picks up during the last month of the year. During the six-session streak the gain has only been 5.4 percent, but it does have the ETN trading at the best level in two weeks and yesterday’s volume increased dramatically.
The CBOE Volatility Index (VIX) broke out Tuesday to the best level in six weeks. Based on the chart the VIX should continue to move higher, suggesting stocks have further to fall before the short-term pullback is complete.
United States Oil ETF (NYSE: USO)
A surge of 2.4 percent yesterday has the ETF at the best level in a month. Over the last three trading days the ETF is up 4 percent after falling to a multi-month low after the Iran deal was announced. It is obvious that traders do not put much trust in the Iran agreement and oil is moving higher despite the deal. The United States Gasoline ETF (NYSE: UGA) also broke out Tuesday, closing at a new two-month high.
iShares S&P Latin America 40 Index ETF (NYSE: ILF)
More losses for Brazil after the country reported a GDP that contracted by 0.5 percent yesterday morning. ILF is heavily invested in both Brazil and Mexico, with the latter outperforming this year. The iShares MSCI Mexico ETF (NYSE: EWW) was able to close outperform and closed with a gain yesterday.
The Brazilian counterpart, the iShares MSCI Brazil ETF (NYSE: EWZ), lost 1.2 percent. ILF fell in the middle with a loss of 0.65 percent, however it closed at the lowest level since early September. Both ILF and EWA bear watching this week as the situation in Brazil could quickly get worse and drive down both ETFs.
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