Exchange traded funds are just like stocks — they can track the market, lag the market or outperform. It all depends on what you buy. The stock market as measured by the S&P 500 was down nearly -2% last week. But my 5 ETF picks last week were down about -1%.
Now that more folks are saying the market is ready to capitulate again, it’s time to change things up a bit by focusing on a short-side ETF that actually profits when the market goes down — the ProShares Short S&P 500 (NYSE: SH) — in addition to exchange traded funds focusing on areas of opportunity.
Here are my five Top ETF buys for this week.
SPDR Gold Shares (NYSE: GLD) – Gold is a fools game? Not so fast. Until I hear otherwise from the Federal Reserve I’m fully expecting all hands on deck to fight deflation. That allows us to safely bet on gold as the inflationary play. Add in the fact that policy makers want a weak dollar as to promote domestic manufacturing jobs and you have the ingredients for a can’t lose with gold scenario.
SPDR S&P Semiconductor (NYSE: XSD) – Last week Cisco crushed the bull market in technology. I’m of the opinion that Cisco’s problems are unique to Cisco. Technology will be the main beneficiary of a weaker dollar and efforts to pump the U.S. economy. Iif the market goes up next week, this ETF will lead the way.
SPDR Dow Jones Industrial Average (NYSE: DIA) – The Dow held in there pretty well amidst the weakness last week. That is exactly why I want this position in an absolute return portfolio. It might dampen my returns on the upside, but it helps mute losses on the downside.
ProShares Russell 2000 (NYSE: IWM) – Looking for solutions to help stabilize the economy? The new Washington power elite will sure to be looking for ways to prop up the smaller business. Assuming they can turn the other cheek to the powerful large company lobbyist that would prefer to avoid such assistance. The truth is we need a strong small company sector to boost the economy and stabilize things.
ProShares Short S&P 500 (NYSE: SH) – It would a bit dangerous to go 100% long in the current environment. I’ll resist the temptation by using this inverse ETF to protect against losses in the market. It is this little position that will help us cut our losses should the market fall further this week.
When most expect further losses in the market next week, I would expect the opposite. These 5 positions are best suited to help you prosper if that is the correct forecast.