5 ETFs to watch this week

Pay close attention to funds tracking sugar, home construction and natural gas.

By TheStreet Staff Nov 15, 2010 10:46AM

Tools for your stock portfolio © CorbisBy Don Dion, TheStreet

 

Here are five exchange-traded funds you should watch this week.

 

1. SPDR S&P Retail ETF (XRT)

 

The most concentrated portion of the current earnings season will wrap up this week when Wal-Mart (WMT) reports Tuesday. Other companies reporting include Urban Outfitters (URBN), TJX (TJX), Gap (GPS) and Nordstrom (JWN).

 

The coming holiday shopping season should benefit discounters, luxury destinations and teen retailers. However, picking individual winners can be difficult, as certain aspects of the retail industry usually outperform others.

 

Rather than trying your luck with individual names, use a fund like XRT, which will allow you to take advantage of investing in the industry as a whole.


2. iShares Dow Jones U.S. Home Construction Index Fund (ITB)

 

Although I remain adamant that we are well on the road to economic recovery, not all areas of the market are equally promising. One slice whose outlook is questionable is real estate. With supply issues still posing a threat, residential homebuilders still face substantial hurdles on their way back to strength.

Despite their headwinds, the week ahead could prove exciting for ITB and fellow homebuilder ETF, SPDR S&P Homebuilder ETF (XHB).

 

Household names from the home construction industry, Home Depot (HD) and Lowe's (LOW) are scheduled to report their quarterly earnings early in the week. Their numbers and outlook for the coming future will play a big part in shaping the sentiment towards this industry.

 

3. iPath Dow Jones UBS Sugar Total Return Subindex ETN (SGG)

 

Sugar prices have been on a tear over the past few months, leading SGG to recover all of its early 2010 losses and continue on to test brand new highs. The sweetener's days of rallying may be over, however, as prices took a sharp turn lower late last week.

 

Forecasts of a sugar surplus in India played a big part in driving sugar prices to their steepest one-day drop in 30 years last week. Also aiding in the commodity's sharp sell-off was the Pakistani government. In order to fight back against rising prices, the nation's interior minister gave hoarders a two day ultimatum to release more sugar into the market.

 

As we head into this week, it will be interesting to see if sugar is due for a further tumble. Sharp drop-offs such as the one witnessed last week highlight the volatile nature of single commodity funds. Conservative investors should not be taking on exposure to funds such as SGG. Rather, agriculture bulls would be better off with a well diversified play such as PowerShares DB Agriculture Fund (DBA).

 

4. iPath Dow Jones UBS Natural Gas Subindex ETN  (GAZ)

 

Accurately using ETFs and ETNs to track natural gas prices was difficult last week. While the United States Natural Gas Fund (UNG) ended the week on a down note, GAZ powered higher nearly every day, locking in some of the industry's strongest gains.

 

Although both are designed to track the same commodity, it is clear that the 26% premium is distorting the performance of the iPath ETN option.

 

Although I wouldn't recommend using either of these funds as a way to capture natural gas, GAZ is particularly susceptible to trouble at this time.

 

5. Global X FTSE Norway 30 ETF (NORW)

 

Global X, which is fast becoming a leading player among boutique ETF providers, came to the market with a number of new products in the first weeks of November. The firm has launched funds aimed at tracking gold explorers, uranium, and now Norway.

Although it is seen as the first pure play on this European nation, it is not the first product from Global X which seeks Norwegian exposure. Rather, one of the fund's very first products, the Global X FTSE Nordic 30 ETF (GXF), dedicates more than 17% of its portfolio to the nation.

 

Although it has been slow off the start, NORW already boasts a higher average daily trading volume than GXF. It will be interesting to see if this trend continues.

 

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