Market Overview

A Look Ahead: This Week's ETFs to Watch

A Look Ahead: This Week's ETFs to Watch

The big news last week was that the S&P 500 finally managed to notch a new all-time high just 1,570 and the benchmark U.S. index did so in a holiday-shortened week.

The first quarter is now in the books and it was the best first quarter for U.S. stocks since 1998. Now, a rally that has lasted longer than many expected heads into April, the last month in the best six-month cycle for stocks.

Still, this rally has it doubters. Detractors would point to leadership by low-beta sectors such as consumer staples, health care and utilities as one sign risk appetite remains limited.

Other detractors would point to the fact that, broadly speaking, emerging markets stocks were dreadful in the first quarter.

With those factors in mind and another jobs report looming Friday, these are some of the ETFs that will be in play in the week ahead.

PowerShares QQQ (NASDAQ: QQQ) Acknowledging that technology was a laggard sector in the first quarter, particularly compared to far more conservative fare such as staples, it should also be noted that April is often kind to the tech sector.

In fact, over the past five Aprils, the PowerShares QQQ has gained an average of 3.6 percent, according to Seasonal Odds.

Perhaps even more important is the fact that Apple (NASDAQ: AAPL), QQQ's largest holding, has gained an average of 7.7 percent in the past five Aprils. Legitimate participation from Apple could be just what the bulls need to keep the sell in May and go away crowd at bay. QQQ needs to break $70 on strong volume to lure new buyers in.

iShares MSCI Emerging Markets Index Fund (NYSE: EEM) As the second-largest emerging markets ETF and the one that tracks an index that billions and billions of dollars are benchmarked to, EEM is often in the spotlight.

In the first quarter, EEM was in the spotlight because of laggard performances from the BRIC quartet, South Africa, South Korea and Taiwan. That had the so-called experts aflutter about how awful emerging markets equities were acting.

Unfortunately, what got lost in translation is that not all emerging markets have been bad to start the year. In fact, some have been downright impressive. The problem is many investors and EEM focus on the big developing nations, which the big first-quarter disappointments.

Two things to remember about EEM in the near-term. First, it really needs some combination of BRIC, South Korea, South Africa and Taiwan to start chipping in for some upside. Second, if support at $42 fails, a return to the November 2012 lows is possible.

Health Care Select Sector SPDR (NYSE: XLV) Sweet Sixteen. No, that is not a reference to March Madness, but rather to the almost sixteen percent gain posted by the Health Care Select Sector SPDR in the first quarter.

OK, so XLV gained 15.9 percent to be precise, but that is still nearly triple the gain posted by the Technology Select Sector SPDR (NYSE: XLK) and more than triple the run of the Materials Select Sector SPDR (NYSE: XLB).

This is no false rally in XLV, either. In late February, the ETF had 140.7 million shares outstanding. As of March 27, that number was nearly 154 million, according to State Street data. What that means is a lot more traders are hitting the buy button on XLV than the sell button.

XLV is often thought of as blue-chip pharmaceuticals type of ETF, but the fact of the matter of is the biotechnology sector is on fire and that is helping XLV, which as a 15 percent weight to that group. Indeed, these are halcyon days for large-cap health care equities.

For more on ETFs, click here.

Posted-In: Long Ideas News Sector ETFs Broad U.S. Equity ETFs Short Ideas Specialty ETFs New ETFs Emerging Market ETFs Best of Benzinga


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