Stocks closed higher on Friday, but it was not to avoid a weekly loss. A six-week winning streak for equities is now over, but riskier assets got a boost on Friday on speculation the European Central Bank could step up its bond-buying efforts.
Add that to rampant hopes the Federal Reserve will engage in a third round of quantitative easing and ample speculation that the Peoples' Bank of China will ease as well and it is easy to see that the near-term outlook for equities lies in the hands of global central banks.
Said differently, central banks keep dangling carrots in front of traders and like a pack of hungry rabbits, traders keep falling for the trick. Easing or not, the following ETFs will be worth watching in the week ahead.
iShares Gold Trust (IAU) Or the SPDR Gold Shares (GLD) or any other ETF backed by physical gold. IAU, GLD and rival funds got a lift this week on the back of easing hopes. IAU jumped 3.3 percent amid for the simple reason that monetary easing has previously proven to be a boon for gold. What cannot be overlooked is silver's impressive rise. The iShares Silver Trust (SLV) surged 9.2 percent this week. With gold on the move higher, poor man's gold (silver) looks poised to follow suit.
Direxion Daily Semiconductor Bear 3X Shares (SOXS) Despite a sharp pullback on Friday, SOXS enjoyed a fine week, gaining almost 4.5 percent. This is not the most important ETF to watch next week, but it bears noting the Nasdaq 100 has been showing signs it wants to pullback. Not to mention, seasonal trends that favor a bearish view on chip stocks are about to kick in.
Global X China China Consumer ETF (CHIQ) There are well over 200 ETFs offering exposure to China. In theory, many should benefit if the PBOC engages in some form of monetary easing. In reality, many investors will head to the iShares FTSE China 25 Index Fund (FXI). Reality Part II: CHIQ has been eating FXI's lunch.
The just completed week is a prime example. CHIQ was up 1.5 percent while FXI lost 1.4 percent. If China eases over the weekend, run to CHIQ Monday morning and avoid FXI.
ETFS Physical Palladium Shares (PALL) The ETFS Physical Palladium Shares climbed 7.4 percent this week and there are several reasons behind the impressive move. First, as a precious metal, palladium would stand to benefit from QE3. Second, Citigroup endorsed palladium and platinum over South African equities. Third, labor strife in South Africa has been lifting palladium futures.
The labor situation in South Africa is one precious metals investors will want to stay abreast of because the country is the world's largest platinum producer and the second-largest palladium producer behind Russia.
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