Published December 24, 2012
This week will be short on trading time as the Christmas holiday means U.S. markets will be open just 3.5 days, but do not expect the week to be short on anxiety. Fiscal cliff anxiety that is. The market's favorite two-word buzz phrase is likely to have markets paralyzed throughout the week because U.S policymakers left for the holidays without any resolution.
In fact, Congress will not reconvene until Thursday, December 27, meaning lawmakers have just five days left in which to avert the fiscal cliff. Under normal circumstances, it would be wise to be bullish this week. Stocks have strong seasonal tendencies to rise the days before and after Christmas. That is usually the case on the last trading day of the week after Christmas as well.
However, seasonal trends can fly out the window when politicians get involved. Best case scenario is that Democrats and Republicans reach and agreement for a small deal designed to set the stage for more meaningful budget talks in 2013. With that in mind, these are a few of the ETFs to keep an eye this week.
Direxion Daily Gold Miners 3X Bear Shares (DUST) Here is some very bad news for those that still believe gold mining stocks should be tracking gold futures on a more intimate basis. The iShares Gold Trust (IAU) and the SPDR Gold Shares (GLD) have both fallen below their 200-day moving averages.
The problem with that scenario is that gold mining stocks and ETFs such as the Market Vectors Gold Miners ETF (GDX) do not track gold on the way up, but they do just that on the way down. For its part, GDX is 4.5 percent below its 200-day moving average. All of this works out to be very good news for DUST, which should continue to flourish as a short-term trading idea.
iShares Silver Trust (NSYE: SLV) Keeping with the theme of plunging precious metals prices, there is the case of the iShares Silver Trust, an ETF that is off more than 10 percent in the past month. Worse yet, SLV plunged almost seven percent last week and that was during a week chock full of positive U.S. economic data points. Remember, the silver bulls say half of silver demand comes from industrial consumers.
With a slow, holiday-shortened trading week on tap, calling for another seven percent drop in SLV is ambitious. However, the chart is a mess and that means the ProShares UltraShort Silver (ZSL) is probably the better near-term silver play.
SPDR S&P Bank ETF (KBE)/b> The SPDR S&P Bank ETF and its bank ETF rivals were cruising toward strong finishes to 2012 when all of sudden, the fiscal cliff took charge. To be fair, bank stocks seem to be moving higher on any positive cliff news and falling on bad news. If nothing else, that means banks and ETFs such as KBE are somewhat predictable. Unbeknownst to some, KBE has a beta of 1.37, meaning it has a lower beta than the Financial Select Sector SPDR (XLF) and the Vanguard Financials ETF (VFH). KBE is also more of an equal-weight product with more exposure to smaller regional names than is found in larger financial services ETFs such as XLF and VFH. Those factors combine to tell investors two things. First, and the year-to-date returns support this, KBE can be somewhat of a laggard if large money-center banks are driving the financial services space higher. Second, a lower beta and a lower focus on the most controversial banking names implies KBE is one of the better ways to deal with the fiscal cliff noise while staying invested in the financial services sector. For more on ETFs, click here.
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