NEW YORK (TheStreet) -- ETF investors will be edgy this week as they wait to see which way the currency, chip, gold and Treasury markets bounce.
The clock may be ticking for Europe. Sovereign and banking debt still looms over the continent, despite the efforts of the European Central Bank to shore up the system. Much of the recent optimism was tied to the rally in the euro, but as the currency slid lower, talk of Europe's problems starting popping up again.
On a weekly basis, only the declines in the first two weeks of May were larger than last week's selloff in FXE, during 2010.
iShares Comex Gold Trust
Gold benefited from Europe's weakness and IAU put together its second week in a row of gains, following six weeks of losses. On Thursday of last week, IAU moved above its 50-day moving average for the first time since the end of June.
This year's pattern looks similar to that of last year, just before gold went on a three-month long tear. Trading tends to slow down in August though, as much of the world is on vacation. A rally probably wouldn't start for a couple more weeks, but with the euro getting volatile, it will pay to keep a close eye on the metal this week.
SPDR S&P Semiconductor ETF
This fund is going to be interesting to watch this week. XSD made a new 2010 low last week and that sets this fund apart from most other equity ETFs. Top holdings
are performing well, but several holdings were clobbered during last week's decline.
Since the fund uses an equal weighting, a few good performances from the largest holdings can't pull the fund up. Holding No. 16,
, has 3.9% of assets compared to ATML's 5%.
CREE reported fourth quarter earnings last week and had a solid report, but it guided lower on first quarter revenue. Shares were knocked for a 20% loss during the week.
For this week, the semis look oversold and are due for a bounce.
Powershares Ultrashort 20+ Year Treasury
Inflation or deflation? The holders of TBT have placed their bets in a big way, to the tune of more than $4 billion, making this the largest leveraged ETF.
Although TBT is down about 30% in 2010, assets have only started to trickle out in June and July as investors who are betting on inflation expect a very large rise in Treasury yields.
Thus far, they are willing to sit through week after week of losses in the hopes of hitting a huge win in the future.
Last week, the
announced that instead of reversing some of its securities purchases, it would roll the proceeds into Treasury bonds. This sent yields lower once again and caused more losses for holders of TBT. TBT sank to a new low for 2010, but the yield on the 30-year Treasury bond has not declined below where it was in July.
With no sign of inflation and continued Federal Reserve intervention, the heavy anti-Treasury bet is in danger of unraveling. This week, the Treasury releases information on foreign purchases of Treasury bonds in May. TBT holders will likely take a hit should those numbers come in above expectations.
Powershares QQQ Trust
Technology stocks were dealt a blow last week courtesy of
, after investors reacted poorly to earnings.
Shares tumbled more than 10% for the week and QQQQ, which has 2.6% of assets in CSCO following the drop. Semiconductors were the worst performing sector and
, 2.3% of QQQQ, suffered significant losses as well.
Sentiment was very negative at the end of last week and it's unlikely to carry through to this week. Semis may be the best sector to play on a bounce this week, but tech should do well across the board.
-- Written by Don Dion in Williamstown, Mass.
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At the time of publication, Dion Money Management owns iShares Comex Gold Trust.
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.