NEW YORK (TheStreet) -- The financial reform bill, a China-Taiwan deal and the earnings of a major agricultural company will have a bearing this week kon a number of ETFs.
reports earnings on Wednesday and analysts are looking for 80 cents a share, which is about half of the estimate from three months ago and down 40% from estimates from a month earlier.
Generic competition for its Round-Up weed killer, plus increased natural resistance to the formula, has hit the company this year.
Monsanto's stock performance has been negative all year long, leading to a 40% drop in shares. MOO hasn't fared much better, having performed weakly all year before turning negative in late April. MOO is well above its lows from 2009, unlike Monsanto, which is at new lows, but shares still look weak.
iShares: MSCI Taiwan
This week, China and Taiwan will sign a trade deal that could increase trade between the countries by $100 billion.
The deal is favorable for Taiwan's farm industry and entertainment sector, as the island nation provides a steady supply of television programming and pop stars.
Overall, the pact appears more economically favorable to Taiwan, as China may be drawing the island closer with carrots instead of sticks.
The impact of the deal on EWT will be very indirect, as several of the top holdings in EWT are global companies, but there may be a pop this week if it generates investor optimism.
A very thinly traded ETF, the
IQ Taiwan Small Cap ETF
, is likely to see a more direct benefit from the deal over the course of time, but on most days volume has been measured in the hundreds of shares, with some days seeing no trades at all.
Claymore/Alpha Shares China Small Cap
China ETFs bounced last week thanks to the revaluation of the country's currency, but shares of HAO moved lower by the end of the week.
iShares FTSE/Xinhua China 25
fared better, with a small gain for the week.
Both funds have moved very close to their 200-day moving averages and it will be interesting to see if the yuan boost carries through to this week and turns the charts slightly more bullish.
On Friday, the Chinese let the yuan climb higher versus the U.S. dollar after U.S. complaints. American politicians were upset after the yuan fell on Tuesday.
CurrencyShares Swiss Franc
The Swiss have learned a lesson in currency intervention: don't do it. Central banks have rarely been able to push currencies in the direction of their choice for long, with the dominant trend resuming as soon as the intervention ends.
The Swiss were concerned about the franc rising sharply against the euro, as Europeans move assets out of European banks and into Switzerland, so the central bank sold francs and bought euros.
They were able to slow and briefly reverse the appreciation of their currency versus the euro in May and June, but this also caused the franc to weaken versus the U.S. dollar, as the chart of FXF shows.
With the franc stubbornly strong versus the euro, however, and a mounting bill for currency interventions growing, they finally threw in the towel. The result was a spike in the value of the Swiss Franc versus the euro and the U.S. dollar. FXF gained another 1% last week, bringing its rally versus the U.S. dollar to more than 6% in a little over two weeks.
The currency rally has helped
iShares MSCI Switzerland
turn in a decent performance. In local currency, the MSCI Swiss index lagged the indexes of large European economies, but after adjusting for the currency change, it has one of the best returns in June.
The franc should pull back versus the U.S. dollar this week, though, and EWL will likely follow.
Gold needs to close at an all-time high to signal a continuation of the rally. It has been trading in a very tight range between about $1,220 and $1,250 an ounce in June, with GLD in a similarly tight range between about $119 and $122 per share.
Gold has continually failed to break out to new highs this month, but at the other end, the lows are slowly creeping higher. This suggests that a break to the upside is more likely than a break to the downside.
Financial Select SPDR
Financials finally received some good news as the financial reform bill came out of conference committee on Friday of last week. It remains to be seen whether there are enough votes to pass the bill this week, but given that it is less contentious than the health care bill that made it through Congress, passage seems likely.
Health care stocks rallied until the final passage of the health care bill before selling off as the provisions of the bill were digested.
In the case of the financial bill, there are some tough provisions on derivatives, but for the most part the bill lacks teeth. For instance, the Volcker Rule, which proposed a ban on proprietary trading, was instead changed to allow 3% of capital to be used for the bank's own trading. According to a report from
, almost all the banks have this amount or less in proprietary trading.
With uncertainty gone and a mostly favorable outcome for financials, the sector should outperform this week.
-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion Money Management was long 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.