ETF Outlook for the week of March 31, 2014:
PowerShares QQQ Trust (NYSE:QQQ)
The NASDAQ Composite suffered its worst one-week loss in nearly 18 months as the biotech stocks weighed down the index. The QQQ tracks the NASDAQ 100 Index, which are the largest 100 non-financial stocks in the NASDAQ Composite. The ETF is now down 4.5 percent from the decade-high set early March and the RSI indicator is moving into oversold territory.
The magnitude of the pullback has not reached a level of panic and is still considered normal based on the fact the recent pullback remains well above the prior pullback in February. At this point the pullback appears to be much more a buying opportunity than a time to sell based on the chart patterns and the pullbacks over the last 18 months.
SPDR Energy ETF (NYSE:XLE)
The energy stocks have been trading in a range for a large portion of the last six months as XLE continually failed to break above the $88 area. Last Friday the ETF surged over $1 to close at $89.06, the best level since 2008. The ETF breakout was fueled by a 1.5 percent rally in the largest holding, Exxon Mobil (NYSE:XOM).
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The stock makes up 16 percent of the portfolio and the gain on Friday has XOM at the best level since January. The breakout in XLE has coincided with a 2.2 percent rally in the United States Oil ETF (NYSE:USO) last week. For years the large-cap energy stocks such as XOM have been laggards, but as of late they are becoming more attractive and starting to become the sector leaders once again.
iShares MSCI Emerging Markets Index ETF (NYSE:EEM)
A 4.5 percent rally by EEM last week as the diversified ETF at the best level since the last day of 2013. Riding a seven-session winning streak, EEM will be facing some headwinds as profit-taking will likely be an issue for the emerging market bulls this week.
That being said, over the long-term the breakout to the best level of the year is a bullish signal and it could be another indication the emerging markets have found a bottom. The rally was led by Brazil, which was its ETF, the iShares MSCI Brazil Index ETF (NYSE:EWZ) gain 7.7 percent last week. The level to watch on any pullback in EEM this week is support at the $40 area.
ProShares DJ Brookfield Global Infrastructure ETF (NYSE: TOLZ)
Last week TOLZ became the newest ETF to hit the market as ProShares begins to expand on its group of traditional ETFs available to retail investors. The ETF is a basket of 120 companies that derive at least 70 percent of their revenue from infrastructure-related businesses. The current portfolio consists of stocks in the following categories: oil & gas storage & transportation, electric transmission, master limited partnerships, communications, toll roads, water, airports, and ports.
A large portion of the ETF is invested in utility and energy companies with the largest holding being National Grid Group (NYSE:NGG), a U.K.-based utility company. About 50 percent of the stocks are based in the U.S., followed by the U.K., Canada, and Spain. TOLZ will compete with the iShares S&P Global Infrastructure Index ETF (NYSE:IGF), which closed last week at the best level since 2008.
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