ETF Watchlist for February 10, 2016

WisdomTree Chinese Yuan (CYB)
WisdomTree Bloomberg USD Bullish (USDU)
CurrencyShares Euro Trust (FXE)
CurrencyShares Swedish Krona (FXS)
CurrencyShares Canadian Dollar (FXC)
CurrencyShares Japanese Yen (FXY)
WisdomTree Emerging Market Currency (CEW)
WisdomTree Commodity Currency (CCX)
PowerShares DB U.S. Dollar Bullish Index (UUP)

The Japanese yen broke out of a trading range that stretches back to December 2014. The euro is also rallying against the U.S. dollar, and weakness in the dollar has been generally bullish for the global economy. The U.S. Dollar Index would need to break below 94 on the downside, or the euro above $1.15, in order to signal a breakout. The yuan, commodity currencies and emerging market currencies have all experienced a small bounce.

United States Oil (USO)
SPDR Energy (XLE)
FirstTrust ISE Revere Natural Gas (FCG)
Global X Copper Miners (COPX)
Market Vectors Coal (KOL)
Market Vectors Steel (SLX)

Oil prices continued to tumble, falling to $27.39 per barrel on Wednesday, but the equity market did not follow the decline as it has in recent weeks. ConocoPhillips (COP) cut its dividend by two-thirds last week and Anadarko (APC) slashed its payout by 82 percent yesterday, ending uncertainty and shoring up the firms’ financial positions. The moves will free up capital for acquisitions and capital investments to increase long-term value. Industrial commodities such as copper, steel and coal stocks are also enjoying a small bounce.

iShares MSCI Emerging Markets (EEM)

Emerging markets mirror the resource sector and the emerging market currencies. Weakness in the U.S. dollar lifted all three sectors over the past week, but EEM needs to climb above $31 before it starts turning even short-term bullish.

Market Vectors Indonesia (IDX)

IDX is bucking the overall trend in emerging markets. The Indonesian economy was hurt by the slowing Chinese economy, particularly in the area of coal and other natural resource exports, but Indonesia also has domestic infrastructure development that can fuel economic growth. GDP grew at an annualized 5 percent in the fourth quarter thanks to government infrastructure investment. Long-term reforms will take time to kick in, but if the government continues investing in public works, Indonesia can buck global economic trends for some time.

SPDR Utilities (XLU)
SPDR Pharmaceuticals (XPH)
SPDR Materials (XLB)
SPDR Consumer Staples (XLP)
SPDR Consumer Discretionary (XLY)
SPDR Healthcare (XLV)
SPDR Technology (XLK)
SPDR Financials (XLF)

Industrials, materials, utilities and consumer staples were the week’s best performers. Those returns are quite good against the 3 percent decline in the SPDR S&P 500 (SPY) over the same period. Consumer cyclicals underperformed technology due to weakness in Amazon (AMZN), which is the top holding in XLY, but not in XLK. Disney (DIS) also pulled the fund lower.

iShares iBoxx High Yield Corporate Bond (HYG)
iShares iBoxx Investment Grade Corporate Bond (LQD)

Investors continued to favor investment grade credit over high-yield last week, but treasuries were still dominant; a dip in the U.S. dollar did not deter investors from buying. Positive yields have benefited the U.S. bond market. Japan’s 10-year government bond yield fell below zero yesterday. The German 10-year bond is barely positive with a 0.2 percent yield, and there is some expectation the European Central Bank could cut interest rates further below zero in March.

Market Vectors Gold Miners (GDX)

Gold prices have rallied in the past month. A pullback is likely though, and the $1200 level has served as resistance.

SPDR S&P 500 (SPY)
iShares Russell 2000 (IWM)
S&P Midcap 400 (MDY)
PowerShares QQQ (QQQ)
SPDR S&P Dividend (SDY)

Although small-caps are still falling relative to the S&P 500 Index, mid-caps have outperformed in the past month. The Dow is also showing strength and a long-term chart shows the current move may signal a reversal in relative performance.

The relative underperformance in the Nasdaq is similar to the pullback in early 2014, which the Nasdaq went on to erase by late summer. If the current move tracks that dip, the Nasdaq should start a relative recovery soon and has shown a modest climb over the last week.

Dividend-paying shares reflected the greatest reversal. There are many dividend funds with different strategies, but overall they’ve struggled in the past few years. SDY has lagged since late 2009, but in the past seven months, it has erased five years of underperformance.

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