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A Look Ahead: This Week's ETF's to Watch

August 12, 2013 6:25 am
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A Look Ahead: This Week's ETF's to Watch

Last week was one to forget as U.S. stocks skidded to their worst weekly performance in nearly two months.

A cacophony of tapering chatter from various members of the Federal Reserve was the culprit in a week that was otherwise light on economic data. Valuations may also be playing a part in investors' skittishness toward stocks.

The S&P 500 now trades at 15.3 projected earnings, up from a multiple of 13.1 at the beginning of this year, Bloomberg reported. There is that little tidbit and the fact that August, as has been mentioned plenty of times already, is not usually a great month to be long stocks and that seasonal trend appears to be at play again this year.

Related: Seasonal Trends: Three ETFs to Own in August.

Some ETFs are already showing signs of dodging the late summertime blues. Plenty are worth monitoring in the week ahead. Here are a few to keep in mind.

Materials Select Sector SPDR (NYSE: XLB)
The Materials Select Sector SPDR, to this point in 2013 the worst performer among the nine sector SPDRs, turned in a decent performance last month. That gain for XLB was helped in large part by news that investor Nelson Peltz had amassed a large stake in Dow component DuPont (NYSE: DD), XLB's largest holding.

On a related note, there was unusual options activity spotted last week in Dow Chemical (NYSE: DOW) on speculation a yet-to-be identified activist investor has built a position in that stocks. For XLB shareholders, this is important news because Dow Chemical is the ETF's third-largest holding at a weight of 8.8 percent. With over 19 percent of XLB's weight reportedly drawing attention from activist investors, the under-performing ETF is one to watch in the weeks ahead.

Vanguard Financials ETF (NYSE: VFH)
Or just about any other large financial services ETF that is heavy on big-name bank stocks. And the reason extends beyond the fact that the financial services sector trails only consumer discretionary and health care for the title of 2013'2 top-performing. As was noted a couple of weeks ago, financial services are close to reclaiming the top sector weight in the S&P 500.

That would be the first time the sector has worn that crown in more than five years. And it is the big banks that have been leading the sector's charge this year. Banks such as J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC). Those stocks combine for about 18 percent of VFH's weight.

Well-documented is the fact that BRIC ETFs have not lived up to expectations this year. In fact, ETFs tracking Brazil, Russia, India and China, be they single-country or combination funds, have been utter disappointments.

What makes the iShares MSCI BRIC ETF an interesting play at the moment is that the ETF is on the cusp of breaking resistance created by a multi-month downtrend line. Same goes for the largest China and Brazil ETFs and that is important because those two countries combine for over 69 percent of BKF's weight.

For more on ETFs, click here.

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