Global Unrest Fuels One ETF; Global Metals Demand Another One

ETF Outlook for Tuesday, July 22, 2014

After beginning the week lower, stocks were able to rally into the close and ended Monday with modest losses.

The geopolitical concerns continue to be the black cloud hanging over the market; however, investors have become numb to unrest around the world. Over the last 15 years the number of hot spots globally has consistently been high. Investors no longer panic as they did before 9/11.

The important factor will be the magnitude of any escalations in the Ukraine or Gaza this week.

iShares Dow Jones U.S. Aerospace & Defense ETF (NYSE:ITA)

Considering what's happening around the world, the winner among sector ETFs yesterday was no surprise. The ETF gained 0.5 percent and should continue its winning ways today after Lockheed Martin (NYSE:LMT) reported better than expected earnings before the opening bell.

ITA has strong support at $105 and resistance near $113; the ETF closed yesterday at $108.21.

PowerShares Dynamic Leisure & Entertainment ETF (NYSE:PEJ)

The ETF's fifth largest holding, McDonalds (NYSE:MCD), reported earnings this morning that are not being greeted by investors with open arms. The stock is trading lower premarket, and it could weigh on shares of PEJ.

The ETF has several other stocks in the top ten that have been in the news lately. Shares of Time Warner (NYSE:TWX) spiked on a potential takeover, and Yum! Brands (NYSE:YUM) has fallen hard after earnings last week.

The ETF lost 0.7 percent yesterday to close at $33.60. The important short-term support for the ETF is at the $33.25 area.

PowerShares DB Base Metals ETF (NYSE:DBB)

A 1.4 percent rally yesterday sent the commodity ETF to the best level in more than a year.

The rising price in zinc, which makes up 37 percent of the allocation, has helped push the ETF to new highs. The remainder of the portfolio is composed of aluminum (33 percent) and copper (31 percent). Both aluminum and copper prices have also been strong over the last few months, as global growth has remained at levels that could put pressure on supplies.