Business Magazine

ETF Periscope: Earning Season Dawns As Europe Remains in Twilight

Posted on the 09 January 2012 by Phil's Stock World @philstockworld

Courtesy of Daniel Sckolnik, ETF Periscope

“If you can do a half-assed job of anything, you’re a one-eyed man in a kingdom of the blind.” — Kurt Vonnegut

ETF Periscope: Earning Season Dawns As Europe Remains in Twilight
The first week of the New Year seemed to reveal a Wall Street that remained both cautiously optimistic yet timidly skittish at the same time, continuing a trend that developed over the month of December.

The Dow Jones Industrial Average (DJIA) gained ground for a holiday- shortened week that continued with a level of light trading that has remained a hallmark of the holiday season.

The DJIA ended the week at 12,359, up 1.2% for the New Year. The benchmark S&P 500 Index (SPX) also started the year up slightly, gaining 1.6%. The SPX has ended above its 200-day moving average for the last four sessions, something it has been unable to accomplish at any time since last July. The tech-heavy Nasdaq Composite Index (COMP) showed the most strength of the leading indexes, posting a 2.7% gain on the week.

This week should test investor sentiment at a deeper level, as the new earnings season continues to unfold at a more rapid clip.

The corporate picture that emerges from the next wave of earnings reports will find itself in stiff competition with the news from across the Atlantic, considering that last week’s latest round of Italian bond-selling revealed the fact that investors continue to factor in a high level of risk in the yield, currently above 7% on the 10-year note. This level of cost of debt is generally regarded as “unsustainable” by investors on both sides of the ocean.

In spite of positive economic news out of Washington in the form of last week’s jobs report, the fact remains that, should the new numbers out of corporate America skew to the short side, any negative news from out of the euro-zone will be amplified to a high degree.

 

What the Periscope Sees

 

One ETF that has appeared recently on ETF Periscope’s radar is UNG (United States Natural Gas Fund), which tracks natural gas futures. UNG is currently close to the lowest levels it has ever been at, closing Friday at 6.64. Though there remains a certain risk that it will remain at these levels for a while, it may have hit bottom, and is finding support at its current level. As such, it may be a good time to add this to your portfolio as a longer term energy play, either by buying the ETF itself or by purchasing call options several months out.

 

ETF Periscope

 

Full disclosure:  The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.


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