ETF Outlook for Wednesday, December 18 (SPY, SMH, ICF, OIH, INTC)
ETF Outlook for Wednesday, December 18, 2013:
Market Vectors Oil Service ETF (NYSE: OIH)
After the closing bell Tuesday, Barclays said it expects the oil services sector to outperform the overall market in the coming years and raised its target on a number of individual stocks. Many of the stocks that were mentioned are members of OIH and other oil service ETFs.
After falling by seven percent in the last month, it would not be surprising to see the ETF rally today on the back of the bullish comments as well as the technical oversold reading. The top three holdings in OIH had their targets raised: Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL) and National Oilwell Varco (NYSE: NOV).
SPDR S&P 500 ETF (NYSE: SPY)
The market will likely trade in a narrow range Wednesday until the Fed makes its announcement on interest rates and policy going forward. Everyone already knows the Fed funds rate will remain unchanged. However, the wild card is whether the Fed believes the U.S. economy and jobs market is strong enough to begin the tapering of their $85 billion/month asset purchase program.
Considering the economy is “okay” and there are still way too many people out of work the odds of a taper announcement is not high. That being said, others (including the Fed) may view the economy as improving at a good enough pace to begin the tapering. No tapering announcement should send the SPY and stocks higher. The announcement that tapering will begin cannot be good for SPY or stocks around the globe.
iShares Realty Majors Index ETF (NYSE: ICF)
The basket of mainly large-cap REITs is on the verge of hitting a fresh multi-year low if it cannot hold the low of August 2013. With interest rates increasing and the talk of a taper in the near future it makes the high yielding investment vehicles less attractive. Even though ICF currently pays a dividend yield of 3.4 percent, it is not enough to lure investors that believe the 10-year yield could be in that range within the next 12 months.
The level to watch on ICF for the rest of the week is $73.78, the closing low from August 19. Considering the ETF closed yesterday at $74.69, it would not take a big move to send ICF through major support and generate a major sell signal.
Market Vectors Semiconductor ETF (NYSE: SMH)
Merger activity in the semiconductor sector has investors putting money into the volatile technology arena. SMH was able to outperform its market peers yesterday with a gain of 0.8 percent and is now trading less than one percent from a new multi-year high. The technology sector is often overlooked as investors love to hate the big names such as Intel (NASDAQ: INTC) for some reason. Apparently that has not been the best strategy as the ETF continues to move higher even as the broader market struggles.
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