ETF Outlook For The Week Of May 19, 2014 (QQQ, EPI, XHB, XLF)

PowerShares QQQ ETF QQQ

The ETF that tracks the NASDAQ 100 Index rallied in the final 90 minutes on Friday to end the week in positive territory with a gain of one percent. It appeared the sellers were looking to take control of the technology-heavy index heading into the weekend before late buyers put that theory to rest. The index does continue to lag the S&P 500 and Dow as they both sit just below record highs, but the good news is that since hitting a low in April, the ETF has been making higher lows and is in the midst of a new mini-uptrend. If that trend continues this week, it will be a positive sign not only for tech stocks, but the entire market.

WisdomTree India Earnings ETF EPI

After a landslide victory by the opposition party in the world’s largest election in India last week, all eyes will be on how the country’s stocks react this week. EPI was up 10 percent last week and closed at a multi-year high as the stock indices in India closed at all-time highs. There was some fear that the Indian ETFs would suffer a “buy the rumor, sell the news” situation after it was it was official that the election results were confirmed. However, the Indian ETFs continued their rally into the weekend as the euphoria remained. This week could be a different story as investors lock in big gains in a short time frame. At the very least, look for above-average volatility in the days ahead.

Related: Indian ETFs Rally On Election Victory (EPI, INDY, SCIF, SMIN)

SPDR S&P Homebuilders ETF XHB

The housing numbers on Friday were a welcome surprise to the beleaguered sector. The numbers of permits for new housing units were up eight percent and the number of homes that builders began construction on increased by 13 percent. The top line numbers were extremely impressive and it pushed the related stocks higher, however underneath the hood it showed that majority of the good news was related to apartment building, not single-family homes. That being said, it was enough to push XHB up 1.1 percent on Friday, however the ETF was down 0.3 percent for the week. From a technical perspective, XHB is at an inflection point as it closed at important support at the $30.50 on Thursday after trading below it most of the day. The follow through Friday combined with a bullish RSI reading points to higher prices in the week ahead.

SPDR Financial ETF XLF

As the indices sit near highs, there is one sector that has yet to join the rally that is of concern to many investors. The financial and banking stocks have been lagging and XLF lost another 0.8 percent last week. The news of large hedge funds lowering their exposure to the sector could have something to do with the underperformance after years of outperforming the overall market. At some point, the financials will have to join the rally for the major indices to continue hitting highs. XLF has support in the $21.15 - $21.50 area, which it has been able to hold recently. A breach below support and it will generate some major red flags for the overall stock market.