ETF Watchlist for August 6, 2014

Guggenheim Solar (TAN)

First Solar (FSLR), the third largest holding in TAN, slipped following a second quarter earnings miss. The company says it is still on course to hit its full year targets.

Shares of TAN rallied on Tuesday, even though the broader market was weak. The ETF has struggled to move higher since hitting a peak in early March. A key support level is $37.50 and a break below could unleash another wave of selling. If this were to occur, a drop of more than 30 percent from current levels is possible.

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First Trust Dow Jones Internet (FDN)

We will soon see if internet stocks are going to challenge their March highs or May lows. The bulls have an advantage with the 50-day moving average rising above the 200-day. FDN has remained above $58 per share, an important line to watch this week.

Since mid-June, FDN has been trading between $58 and about $60.5, a range of a little more than 4 percent. Given the volatility of Internet shares, these periods of calm do not tend to last very long.

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iShares U.S. Industrials (IYJ)

iShares U.S. Industrials, along with SPDR DJIA (DIA), shows why the recent decline, has some traders wondering if a further decline is on the way. The 200-day moving average is a long-term trend line that has been seldom touched over the past two years. IYJ hugged the line in 2012, but from the start of the rally in late 2012, it hasn’t even come close to hitting the 200-day moving average. However, as the chart of DIA confirms, this line is often a support line. The only time these funds have traded below their 200-day moving averages for an extended time was in 2008 and 2011.

It pays to be cautiously bullish here. IYJ traded below $94 in February and as long as it stays above that low, the forecast is for higher prices.

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SPDR Energy (XLE)

Oil prices remain in a short-term downtrend, having broken below $100 per barrel, while natural gas prices could be making a short-term bottom. Energy was one of the two best performing sectors in the first half of the year, but its slide this summer has put its leadership in jeopardy. As it stands, healthcare and technology have moved ahead of energy and utilities as the leading sectors for the year thanks to recent selling activity.

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SPDR Healthcare (XLV)

Broad healthcare ETFs have held their ground over the past week. Although shares have declined with the broader market, XLV remains close to its highs for the year. Specifically, biotechnology, medical devices and healthcare providers have been steady over this period, while pharmaceuticals have weakened. As mentioned above, healthcare has moved ahead of energy and utilities and is competing with technology as the best performing S&P 500 sector, year-to-date, in 2014.

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SPDR Technology (XLK)

The chart of SPDR Technology is a good contrast with industrials discussed above. The fund has approached its 50-day moving average, but has yet to break it. The strength in technology, signals that the recent selling remains limited. Earnings have been generally good, with several positive surprises.

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Global X FTSE Argentina 20 (ARGT)

Argentina chose to default on its bonds last week. Shares initially held their ground, but have slipped lower along with global equity markets. Argentina is still in a bullish trend though. After years of populist economic policies, the country’s markets may have hit bottom. If ARGT fails to break lower in the coming weeks, it will be a good sign that investors have decided all the negative news is priced into the market.

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PowerShares DB U.S. Dollar Index Bullish Fund (UUP)

The decline in stocks, particularly European shares, along with commodities, has been accompanied by a strong rally in the U.S. dollar. This ETF might be the key to the market right now: a drop in the U.S. dollar will very likely accompany a rebound in stocks and commodities, while a continuation of the U.S. dollar rally will be bearish for these assets. Because the U.S. dollar is overbought, a reversal appears likely, which is good news for stocks this week.

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