ETF Outlook for the market and ETFs for the week of October 28, 2013.
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New Highs for Stocks SPDR S&P 500 ETF (SPY)
A new all-time high for the S&P 500 to end the week as the market preps to move into the best 6 months of the year. Now that the sell in May and go away part of the year is about to expire at the end of October, investors can forget about the old Wall Street indicator. That being said, it does not suggest the market will not experience some rough patches before next May.
In the short-term, SPY has been up 12 of the last 14 sessions and is due for a pullback from an oversold level. Initial support for SPY will be at $173.50, or a 1.5 percent pullback from Fridays closing price. Do not be shocked to see the ETF drift even lower in the days ahead as money shifts at the end of the month. The next support level to watch is the $171 area. Long-term, the trend is extremely bullish and all pullbacks are still considered buying opportunities.
Technology is Hot SPDR Technology ETF (XLK)
Recent breakouts by large-cap tech stocks like Google (GOOG), Microsoft (MSFT), and Amazon.com (AMZN) have XLK sitting at its best closing price ever. The combination of decent valuations and above-average earnings growth has investors rushing into the sector in 2013. For the year the ETF is up 16 percent.
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Chasing the recent surge in the sector is not the best option for investors, a better strategy would be to look for some weakness in the coming days to begin building a position. It is important to note that Apple (AAPL) makes up 15 percent of the ETF and is the single largest holding. If AAPL makes any big moves in either direction it will have a direct affect on the ETF.
The Mystery that is Gold SPDR Gold ETF (GLD)
Over the last 10 month GLD has been a great underperformer as the price of gold remains in a long-term downtrend. The ETF has fallen by nearly 20 percent this year and the charts have yet to signal the end of the trend. That being said, over the last two weeks the precious metal has bee rallying after as investors lean towards more Fed stimulus into next year.
The million-dollar question is whether this is a short-term bounce or the beginning of a new uptrend. While in the short-term the ETF has showed some creative patterns, the long-term chart shows the recent action as merely a short-term bounce. The levels to watch on GLD are $132.78 on the upside and support lies at $121.85.
The Dividend Comeback Global X Super Dividend ETF (SDIV)
An ETF that offers investors exposure to 100 stocks from around the globe and also pays a dividend yield of 7.45 percent sounds like a must-own. SDIV does just that as it invests in 100 of the highest dividend yielding stocks in the world. The largest exposure is to the U.S. at 27 percent, followed by Australia at 19 percent, and the U.K. at 12 percent.
The ETF has lagged the U.S. market this year with a gain of 9.4 percent, but closed out last week 3 cents from a new multi-year high. The middle of the year was not kind to the ETF as income-producing investments were hurt as interest rates increased.
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