Market Overview

Small-Cap, Materials And Treasury ETFs To Watch This Week

Small-Cap, Materials And Treasury ETFs To Watch This Week

The markets opened the initial trading days of October filled with indecision as violent price swings in both directions caught many traders off guard. However, Friday’s strong jobs report added some confidence that stocks could strengthen further.

The week ahead features a relatively light schedule of economic data capped by the Federal Open Market Committee (FOMC) minutes on Wednesday. Third quarter earnings will be kicking off this week as well.

Related Link: Third Quarter ETF Fund Flows Show Broad Market Buying

Here are the key ETFs to watch for the week of Monday, October 6:

iShares Russell 2000 Index ETF (NYSE: IWM)

This broad-based index of small cap stocks has been a serial under-performer all year, leading to concerns that demand has waned for high beta equities. IWM retested its 2014 lows last week and was able to hold those prior support levels as buyers stepped in on Thursday and Friday.

Earlier in the month, IWM was criticized because its technical price pattern signaled a “death cross,” whereby the 50-day moving average crosses below the 200-day moving average. Despite those concerns, if IWM can build off last week's momentum, it will be a strong vote of support for the broader market.

Materials Select Sector SPDR (NYSE: XLB)

On Wednesday, Alcoa Inc (NYSE: AA) will kick off third quarter earnings season after the closing bell. This key aluminum manufacturer makes up 3 percent of XLB and will help set the tone for additional earnings expectations in the materials sector.

XLB currently has $5 billion dedicated to 32 large-cap chemicals, metals, paper products and container companies. After hitting a high of as much as 10 percent this year, XLB has fallen 4 percent in recent weeks.

This ETF could benefit from the release of positive data to stabilize prices and reestablish upward momentum.

iShares Barclays 20+ Yr Treas.Bond (NYSE: TLT)

Treasuries have been one of the best performing asset classes of 2014 and have continued their resilience despite the looming cancellation of bond purchases by the Federal Reserve. So far this year, TLT has gained over 18 percent and is currently trading near its recent highs despite the upbeat jobs data released on Friday.

Treasuries may be impacted this week by the FOMC minutes along with further developments in stocks.  Another round of falling interest rates will be needed to keep this current uptrend intact and boost TLT to new breakout highs. 


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