ETFs in the Path of Current Activity

To quote Chicago Fed President Charles Evans, “I don’t think we should be in a mode where we are waiting to see what the next few data releases will bring. We are well past the threshold for additional action., we should take action now.” That is what investors obviously think as they are willing to sit on their hands and wait for action from the Fed. If Monday is any indication of what to expect from investors as we await some action by the central banks it could get really boring near term.

Some ETFs to watch in light of the current activity this week:

VXX, iPath S&P 500 VIX Short-Term Futures is one of the more popular trading fund for investors to track the volatility of the S&P 500 index. Last week the daily activity in the index picked up in light of the stimulus debate. A quick look at the VIX index shows a drop to the low of 13.3 last week before moving back towards 16 on the FOMC minutes speculation and interpretation. The intraday movement of the index on Monday reflects some of the uncertainty short term from investors. The upside resistance is at $11.80 on VXX, and a break through that level on above average volume is worthy of tracking. There is plenty of activity scheduled on the week that could impact the sentiment of the market and this is one ETF to track as we move forward.

EWG, iShares Germany Index Fund will be in focus as the European Central Bank determines what course of action will work to preserve the euro and add stimulus to the Euro Zone. Germany will play a large role in determining the outcome relative to type and size of stimulus offered. The anticipation of this aid following Draghi’s comments continues to grow. Resistance is in play at $21.55. Europe remains one of the key issues facing investors globally relative to sovereign debt and solutions to helping boost the euro and putting the economy back on its feet.

TLT, iShares 20+ Year Treasury Bond Fund moved below support at $124.50 as the yield on the thirty year bond moved towards the 3% mark. The boost? Economic data was improving and giving some hope of growth in the US without the need for stimulus. Since the shift in focus to the Federal Reserve last week the bond has seen the yield drop back to 2.75% and the price of the bond rise, benefiting TLT. The fund has moved back above the $124.50 level again. If the fear factor rises and/or anxiety relative the future growth of the US economy returns, the bounce may very well continue back towards the previous high at $132. Watch to see how investor emotions swing short term.

Combining the response int TLT and VXX going forward will give investors a good indication short term of what investors are thinking relative growth or safety. The uptrend off the June 4th low remains in play as we test the upside momentum. If the Fed is the stimulus to break higher how far can the trend climb in light of the rally being based on Fed intervention to begin with? The key is to take it one day at a time and see how the data all unfolds this week and moving forward. Plenty of economic data released the balance of the week to go with the rumors swirling around the central banks intervention with some form of stimulus.