NEW YORK (ETF Expert) -- Daily sentiment can change on a "Susan B. Anthony."
For instance, in the time that Prime Minister Mario Monti has held the reins of control in Italy, global markets have felt better about the prospect of the European Union holding itself together.
At the start of last week's trading, in fact, stock assets around the world surged higher on the likelihood that the current power structure would remain. Yet, stocks quickly reversed direction when news reports showed that Silvio Belusconi might potentially return to his former glory, as his party appeared to be winning a majority of votes for Senate positions.
Why should the Italian elections hold so much sway? Changes in leadership for the euro zone's third-largest economy could roil the recent support for the country's reforms. Without the support of nations like Germany, Austria, Sweden and the Netherlands, the "PIGS" (Portugal, Italy, Greece, Spain) could find themselves back in the throes of a sovereign debt meltdown and the
euro zone's stability
might be at stake.
Nevertheless, it may be more constructive for a longer-term thinker to examine buying opportunities for the next significant pullback. Here are three possibilities for a forward-minded ETF enthusiast.
1. Pharmaceutical ETFs:
By 2015, China will become the second-largest market for pharmaceuticals in the world. In order for the big drug companies to continue paying big dividends -- figuratively and literally -- the health sub-sector must expand its reach into emerging markets.
are actively pursuing international relationships. Both already have existing joint ventures in China. Moreover, both are seeking additional alliances with an understanding that it is better to join local companies to benefit from synergies rather than compete on foreign soil.
iShares DJ Pharmaceuticals
as well as
Powershares Dynamic Pharmaceuticals
contain Pfizer and Merck in their respective top 10 holdings. Both exchange-traded trackers maintain solid technical uptrends. Consider entering at a price near the 50-day moving average.
2. Timber ETFs:
So much attention has been paid to homebuilders that many investors overlook the materials involved in remodeling, renovation as well as exporting. Specifically, lumber prices themselves are rapidly rising due to domestic demand as well as demand from China. In fact, framing lumber prices have reached 2005 peaks.
The trouble with getting into exchange-traded funds that track indexes of lumber corporations? Both the
Guggenheim Timber ETF
iShares S&P Global Timber/Forestry
have largely "priced in" recent real estate recovery trends. Each is more than 15% above a 200-day moving average and each would be more attractive on general pressure in the equity markets.
From a macro-economic picture, though, increased demand for lumber is likely to remain intact. It follows that I might look to enter the position on a 10% retracement or a pull back to the 200-day. (Note: You may have to be of a similar mindset that China is "in turnaround" and that the U.S.
policy to depress interest rates will keep lumber prices high for a few years to come.)
3. Auto ETF:
Homes are not the only big-ticket items that have rocketed on the backs of low interest rates. Cars are another potent consumer durable that have seen their makers profit handsomely. In fact, January vehicle sales were nearly 10% greater than a year prior and deliveries to fewer outlets are expected to rise for the fourth consecutive year.
In the same vein as timber ETFs,
First Trust Global Auto
has packed on super-sized gains over the last three months. Perhaps unfortunately, it remains roughly 15% above its 200-day trendline.
If the exchange-traded auto tracker intrigues you, you might benefit from a double-digit percentage correction in the asset. The process appears to have gotten underway as CARZ is resting near its 50-day support. Still, you'd be wise to wait for additional profit-taking before taking a long position.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.
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