ETF Outlook for Thursday, March 20, 2014
PowerShares DB U.S. Dollar Index Bullish ETF (NYSE:UUP)
A hawkish tone from Fed President Janet Yellen lit a fire under the greenback in afternoon trading yesterday as UUP closed up 0.8 percent to a new two-week high. Both the Japanese yen and Canadian dollar fell by 1.0 percent with the latter hitting a fresh five-year low versus the U.S. dollar.
The Rydex CurrencyShares Euro ETF (NYSE:FXE), which hit a two-year high on Monday lost 0.74 percent Wednesday. If the rally in the greenback continues it could send UUP back to resistance at the $21.90 area at which time it will be at a critical level.
SPDR Gold ETF (NYSE:GLD)
The FOMC announcement yesterday and press conference of Janet Yellen sent gold tumbling and GLD finished the session down 1.94 percent. The three-day losing streak has chopped 3.8 percent off the precious metal ETF as it closed at the lowest level in two weeks.
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It appears the Fed is bound and determined to continue the taper and eventually raise interest rates and this has the U.S. dollar rising. A strong greenback is not good for commodities over the long haul and gold is taking its cue from the recent rally in the currency. The next level of support on GLD is the $125 area and it closed out yesterday at $128.09.
iPath Dow Jones-UBS Livestock Sub-Index ETN (NYSE:COW)
The ETN closed down yesterday, but so far in 2014 it has been a top performer with a gain of 20 percent. Trading at its best level in three years, the ETN is composed of futures contracts of live cattle (62 percent) and lean hogs (38 percent). The rally in COW can be attributed to cattle futures hitting record highs as hogs recently traded at their best level in over two years.
The rise in price can be attributed to years of drought in the Midwest that had forced ranchers to cull their herds. This is one niche commodity overlooked, but the recent action on the chart will attract any investors attention.
United State Oil ETF (NYSE:USO)
Going against the trend yesterday was oil, with USO closing here by 0.4 percent. The commodity has fallen over the last couple of weeks before building a base the last few days on the 50-day moving average. Couple that with the RSI reading in oversold territory and the odds are looking good for a bounce in the ETF.
As long as USO can continue to hold above $35 it will be a bullish signal for oil. A catalyst to push the ETF higher could be more uncertainty in the Ukraine as Russia and the Western world figure out their next move.
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