This Week’s Top ETF Buys

Gold and semiconductor ETFs highlight this week's list


This week is shaping up to be a very big week for investors. The election will set the tone, but probably more importantly will be news from the Federal Reserve.

The second round of quantitative easing is set to begin. Perhaps stocks have rallied in advance of the news setting the table for a sell the news event. Then again, the infusion of new capital in the debt markets could push investors to take more risks in stocks.

Given positive earnings momentum and easy money central bank policy the bias for stocks is upward, even if in the short run stocks may be a bit pricey. Add in a swing to the right politically and the state is set for more gains.

I’ll dip my toe in the water, but not too far. Compared with last week’s ETF list, I’ll switch the short Russell 2000 position for the long side. Beyond that I’ll keep my gold, semiconductor and Dow longs with a hedge short of the S&P 500.

Here are the five ETF’s to buy this week:

SPDR Gold Shares (NYSE: GLD) – Gold resumed the rush higher last week. Next week will be all about re-inflating the economy. That means gold moves higher again this week. The only thing that breaks this bull market in gold will be hawkish moves by the central bank. You’ll see that coming a mile away. Until that stay long and strong gold.

SPDR S&P Semiconductor (NYSE: XSD) – Strong earnings in technology shares last week powered the entire semiconductor sector. Any good bull market has technology in the lead. Expect no different as this bull market continues. If we get a rally next week, this is where you can make the most money.

SPDR Dow Jones Industrial Average (NYSE: DIA) – Owning the Dow is like kissing your sister these days. The behemoths of industry are simply treading water at the moment. That’s just fine as the position here is meant to be a bit of a damper in case something goes wrong. Don’t expect to get rich here. Perhaps big stock buy-backs fueled by debt issued at historically low rates will speed things up a bit. No matter what happens here investors can expect to minimize both gains and losses.

ProShares Russell 2000 (NYSE: IWM) – I’m expecting the market to pop a bit next week. If so, look for the smaller stocks to out perform the rest of the market. It is possible that small stocks get a boost from a change in the political climate. Politicians wanting improvement in the job market may provide incentives to small companies to hire. Investors will notice if that happens.

ProShares Short S&P 500 (NYSE: SH) – There is a distinct possibility that the market drops in a sell the news fashion. Such moves are very difficult to predict. Charts, fundamentals, or anything else falls short in attempting to do so. We’ve made good money over the last five weeks. If we are wrong with a slight bullish bias this week this position will minimize the damage.

We are long overdue for a feel good rally. Perhaps we get one this week.

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