4 ETFs to trade ahead of key economic data

With figures for new home sales and durable goods orders expected, this could be a transition week.

By Stock Traders Daily Sep 25, 2012 12:21PM

Home for sale copyright CorbisBy Billy Fisher, Stock Traders Daily


This week there will be an ample amount of economic reports due out that could open the door for trading opportunities. One of the easier ways to play this is through ETFs. 

Here are four trades in particular to consider before the associated economic results come out.


On Wednesday morning, new home sales for August will be reported. Traders looking to get in ahead of the results should look at the SPDR S&P Homebuilders (XHB) as a great option to ride what has been a very bullish trend. In July, the builders sold 372,000 homes for a 26% increase over last year's figures for July.


The homebuilders have been one of the great recovery stories so far this year. The 50-day moving average for XHB broke above the 200-day moving average back in January and has trended upwards ever since. If Wednesday's report shows a continued decline in inventories, this ETF could go parabolic.


In the energy arena, traders will want to monitor the United States Oil Fund LP (USO) this week. The Energy Information Administration will unveil its crude inventories report on Wednesday. USO has been demonstrating support around $34 per share, but another report like last week's could send this ETF crashing lower. Oil stockpiles jumped by 8.5 million barrels last week due to revitalized production in the Gulf of Mexico. This fund is worthy of being shorted ahead of this week's report, but traders are advised to add call protection or a tight stop.


On Thursday, durable orders for August will be announced. The manufacturing industry will have a tough act to follow after posting its largest increase of the year last month. Nondefense capital goods orders ticked down last month and could put a damper on this month's results as well.


Traders should turn their attention to the Industrial Select Sector SPDR Fund (XLI) in the days leading up to the report. XLI has been in a seesaw battle for much of the year. The 50-day moving average for the fund presently sits slightly above the 200-day moving average. I think the likelihood of a weak showing should have traders considering bearish bets that will leave the 50-day moving average on the losing side of this battle.  


One other ETF that traders will have a couple of opportunities to trade this week is the Consumer Discretionary SPDR (XLY). The Conference Board put out the Consumer Confidence report on Tuesday. The index was up 9 points in September. The University of Michigan Sentiment Index comes out on Friday. The fund is up 21.7% year-to-date. Bearish traders would be better advised to consider a put. 


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