Portuguese and Argentine ETFs Under Pressure

ETF Outlook for Thursday, July 31, 2014

Stocks finished an up and down session yesterday virtually unchanged, as investors had lots of economic news to digest.

First GDP for the second quarter came in much better than expected, helping push stocks higher. Then the ADP jobs report was not as strong as anticipated, but it was not terrible. Finally, the FOMC meeting adjourned and Fed Chair Janet Yellen released a statement that broke no ground and helped the major U.S. indices rally from intraday lows.

Today stocks are on the defensive in early trading after a large Portuguese bank cratered at nearly 50 percent. All of Europe is affected, and ripples have spread across the pond to the U.S. Add in the ongoing geopolitical situation, and investors are cautious about buying into new positions.

PowerShares DB U.S. Dollar Index Bullish ETF (NYSE:UUP)

The Fed's statement yesterday coupled with the hot GDP number sent the U.S. Dollar Index to the highest level since February. Investors view the currency as the best option around the world, especially if interest rates are going to be increasing in the near future.

Other currencies are being pressured by their central bankers. The European Central Bank has to deal with slow growth and low inflation. Its relatively accommodative policy can keep the euro down versus the greenback. Japan is pushing down the yen, which is also a boost to the U.S. dollar and UUP.

Global X FTSE Portugal 20 ETF (NYSE:PGAL)

Shares of Banco Espirito Santo fell nearly 50 percent today, as the large Portuguese bank reported a loss of $3.6 billion. The news has the Portuguese market down more than 2 percent, and PGAL is set to open lower on the news. Investors should expect PGAL to open at or near a 2014 low. More selling could happen before buyers start to go bargain shopping.

Global X FTSE Argentina 20 ETF (NYSE:ARGT)

After rallying 4.9 percent yesterday, ARGT is set to open lower today. Argentina has officially defaulted on its debt for the second time in just over a decade. Based on the chart there is some support at the $21.50 area, but if this is breached the ETF could continue a dramatic fall. Expect lots of volatility in the coming days.