5 ETFs to watch this week

Investors should look for defensive trades in this shaky market. Funds tracking China and silver could be due for more wild swings.

By TheStreet Staff Oct 3, 2011 12:13PM

By Don Dion, TheStreetTheStreet

 

Here are five exchange-traded funds to watch this week.

 

1. Market Vectors Agribusiness ETF (MOO)

 

In the second week of October, Alcoa (AA) will provide what many market watchers consider the bellwether earnings report of the season. However, in the days leading up to this event, there will a handful of companies representing the industrials and agricultural sector that will report ahead of the aluminum giant.

 

For instance, Monsanto (MON), an agricultural powerhouse, will report its quarterly earnings along with its outlook on Wednesday. ETF investors looking to target this firm should turn to the equity-backed MOO.

 

Designed to provide investors with exposure to the largest and most recognizable companies in the global agriculture industry, MOO sets aside ample exposure to companies like Mosaic (MOS), Deere (DE) and Potash of Saskatchewan (POT). Monsanto is the fund's largest position, accounting for 8% of its portfolio.

 

2. PowerShares Golden Dragon Halter USX China Portfolio (PGJ)

 

The going has been rough for China-focused ETFs as investors express concern about the nation's growth prospects. While the action for these products going forward could be choppy, one fund I would encourage investors to be especially hesitant towards is PGJ.

 

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Last Thursday, Reuters reported that the U.S. Department of Justice was in the process of looking into accounting issues with Chinese companies listed on U.S. exchanges. In response to news of this investigation, shares of companies including Baidu (BIDU), Sina, and Youku fell hard.

 

According to the fund's Web site, PGJ's index is comprised of "U.S.-listed securities that derive a majority of their revenue from the People's Republic of China." Boasting exposure to firms including the three described above, this fund could be in for turmoil as regulators continue with their investigation.

 

In late 2010, I explained in this article how PGJ's investing strategy differs from other China-backed funds like iShares FTSE China 25 Index Fund (FXI), which tracks a basket of Chinese "ordinaries."

 

3. iShares Silver Trust (SLV)

 

Precious metals continue to see wild back-and-forth action, making it difficult for funds like SLV and iShares Gold Trust (IAU) to find footing. Macroeconomic uncertainty continues to weigh on investor confidence, so it will be interesting to see what is in store.

 

For platinum and palladium specifically, investors should monitor how these metals perform when auto and truck sales numbers are released Monday afternoon. These two auto industry-linked metals are used extensively in the production of catalytic converters.

 

4. SPDR S&P Retail ETF (XRT)

 

The consumer has long been a source of resilience amidst these shaky market conditions. At the close of last week, however, clouds formed over this slice of the economic pie following the release of sub-par personal income data. The report found that incomes dipped by 0.1% in August, undershooting analyst estimates. According to Bloomberg, this marks the first decline since October 2009.

 

Despite this poor showing, I encourage investors to continue to keep a close watch on the consumer. During the middle of the week, Costco (COST) will report its earnings, which will likely provide investors with additional clues as to how the American consumer is faring.

 

5. iPath S&P 500 VIX Short Term Futures ETN (VXX)

 

We are starting a new month but many of the same factors that have plagued the market in recent weeks continue to dominate discussion. After the see-saw action we witnessed during the final week of September, it will be interesting to see how things shape up during the opening days of October.

I encourage investors to continue to rely on defensive assets to navigate the marketplace.

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