Published November 03, 2012
U.S. equities eked gains in a trading week shortened to three days by Hurricane Sandy, but following Friday's sell-off, traders' moods can be described as cautious as best heading into next week. The Friday plunge came even as the Labor Department reported the addition of 171,000 new jobs last month. In the process, Thursday's gains were all but wiped out.
With Election Day looming on Tuesday, November 6, it is reasonable expect a couple of days lethargic action until traders know who the next president will be. It is widely expected that win by Republican challenger Mitt Romney and GOP dominance in House and Senate races could lift stocks in the near-term. However, those scenarios are anything but foregone conclusions.
Regardless of what happens on Tuesday, November is historically kind to stocks. Whether that trend plays out again could be decided as soon as next week. With that, these ETFs should be in play.
PowerShares QQQ (QQQ) It has been well-documented that ETFs with large weights to Apple (AAPL) can be viewed as double-edged swords. Such is life for QQQ. The Nasdaq 100 tracking fund does not have the largest weight to Apple among ETFs, but with an 18.5 percent allocation to the iPad maker, QQQ is vulnerable to the whims of that stock.
Now, QQQ could have a serious Apple problem. The stock closed below its 200-day moving average on Friday, signaling a bull run that seemed never-ending could be in serious jeopardy. That is not good news for this ETF.
Financial Select Sector SPDR (XLF) With a gain of one percent over the past week, XLF has been sturdy and it is worth noting the fund is just 2.4 percent below its 52-week high. The near-term outlook for XLF and rival financial services ETFs is easy to decipher and traders will set that course as early as Wednesday morning. XLF and friends will likely suffer a bit in the wake of President Obama winning reelection. If challenger Romney pulls off the upset, the path of least resistance with XLF will be to be long.
iShares MSCI Brazil Index Fund (EWZ) The largest ETF tracking Latin America's largest economy has been an admirable performer as of late as well. More upside could be in front of the ETF following a bullish write up on Brazil in the most recent issue of Barron's.
Barron's notes Brazilian equities are cheap on a valuation basis while reporting "investors have warmed to Brazil recently, pouring $2.3 billion into Brazil-focused equity funds in the past two months, reversing months of withdrawal."
Good signs to be sure, but keep in mind this little factoid. Brazil was featured on the cover of Barron's almost exactly one year ago. In the past 12 months, EWZ has tumbled 8.1 percent.
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