Five ETFs to Watch This Week

Earnings will play an important role in mining, energy and homebuilding ETFs this week.
Author:
Publish date:

NEW YORK (TheStreet) -- Earnings will play a pivotal role in energy and mining ETFs, but the hangover from the situation in Greece may be the dominant story as April comes to a close this week.

Market Vectors Gold Miners ETF (GDX) - Get Report

Newmont Mining

(NEM) - Get Report

reports on Tuesday and analysts are looking for earnings of 76 cents per share in the previous quarter.

Goldcorp

(GG)

reports earnings on Wednesday, with analysts looking for earnings of 26 cents per share.

Barrick

(ABX)

also reports Wednesday and the average estimate is for earnings of 62 cents per share.

These gold mining titans aren't the only firms reporting, but they're the top three holdings in GDX and account for a combined 38% of assets.

Currency volatility has aided gold prices in recent months and this will continue. Although the gold price has struggled to move higher as the U.S. dollar has been strengthening, the churning of the euro has made some investors swap their paper money for gold. Even though the gold price is lower in terms of U.S. dollars than it was in December, the decline has been much smaller than the gain in the U.S. dollar versus foreign currency.

Also, since Jan. 19, the day before global markets started a three-week slide, gold and the U.S. dollar have both strengthened.

SPDR Gold Shares

(GLD) - Get Report

is up about 1%, but the

PowerShares DB U.S. Dollar Index Bearish Fund

(UDN) - Get Report

has lost about 5%.

Euro Shares

(FXE) - Get Report

Last week we learned that the Greek deficit was higher than previously calculated and spreads on Greek bonds increased to a new high versus their German counterparts. The euro flirted with new lows for the year, but managed to hold critical levels on Friday after Greece finally asked for the EU-IMF for a $40 billion bailout.

The market has yet to digest this news, however, as other countries such as Portugal and Spain could be next in line for bailout money now that the precedent is set with Greece, which may need more money. Another decline in the euro is likely on the way, once the market realizes the problem is not solved.

Energy Select Sector SPDR Fund

(XLE) - Get Report

Energy giants

Exxon Mobil

(XOM) - Get Report

,

ConocoPhillips

(COP) - Get Report

,

Occidental Petroleum

(OXY) - Get Report

and

Apache

(APA) - Get Report

report on Thursday, while

Chevron

(CVX) - Get Report

reports Friday.

Last week, the drillers reported earnings and shares of

iShares Dow Jones U.S. Oil Equipment & Services

(IEZ) - Get Report

was one of the biggest winners of the week, aided by a strong earnings related rally in shares of top holding

Schlumberger

(SLB) - Get Report

on Friday.

The drillers didn't report great earnings, but with oil prices at higher levels in the past quarter, there was some optimism in the outlook, especially from Schlumberger.

The majors probably did slightly better in the earnings department, but refining will be a drag. Investors will look for optimistic guidance from these firms and if they deliver, XLE will rally and the gains will be widespread across the energy sector.

United States Natural Gas Fund

(UNG) - Get Report

Since finishing its big slide in the first quarter, UNG has been moving sideways. It's rallied as high as $7.65 in April, but spent most of the time below $7.50. On the other end, it hasn't closed below $7 per share.

Also, the highs have been falling and the lows have been rising in April, which forms a short-term triangle pattern. A move above or below would signal a short-term breakout, and on Friday, UNG broke out of this range to the upside.

Inventory numbers were the trigger for natural gas to rally on Thursday and Friday of last week, and this rally could continue at the start of this week.

iShares Dow Jones U.S. Home Construction Index Fund

(ITB) - Get Report

Homebuilder

D.R. Horton

(DHI) - Get Report

reports earnings on Friday; it accounts for nearly 8% of ITB.

D.R. Horton sells budget homes and since first-time homebuyers generally have less money to buy a home, the federal tax credit for first-time home buyers has been a bigger help to DHI than to other homebuilding firms. That credit expires on Friday, the day that DHI reports earnings.

Over the past three quarters, analyst estimates have been extremely wide of the mark with DHI. For the quarter ended June of 2009, earnings were 96% below estimates. In the September quarter, DHI missed estimates by 140%, while in the December quarter, it beat by 500%.

Analysts have raised their estimates since the previous positive earnings report, from a loss of 18 cents to a loss of 1 cent, but I think they're still too pessimistic. Investors seem to agree, as shares of DHI were bid up about 15% last week, along with other homebuilder stocks.

There are other homebuilders reporting this week, such as top 10 holding

Ryland Group

(RYL)

, which accounts for 4% of ITB.

As long as these reports and guidance are OK, ITB should do well. However, if ITB rallies all week, investors may sell on the DHI report Friday, since home builder shares were bid up so much last week and the expiring tax credit could make for less optimistic guidance.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion was long IAU.

Don Dion is president and founder of

Dion Money Management

, 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.