Amazon Heavy On Markets And This ETF

ETF Outlook for Friday, July 25, 2014

The three major indices closed yesterday essentially flat, each within 0.1 percent of its Wednesday close. The ho-hum day was a battle between bears who cheered some weak housing data and bulls who saw more evidence that second quarter earnings are stronger than expected.

First Trust Dow Jones Internet Index ETF FDN

Shares of online retailer Amazon AMZN will be weighing on the entire market, but especially FDN as it has a 9 percent allocation to the stock. Yesterday the stock hit a mutli-month high, but is down 10 percent this morning after reporting earnings last night that failed to impress Wall Street.

Look for FDN to give back some of its gains it had yesterday after top holding Facebook FB reported strong earnings. Facebook makes up 9.1 percent of the portfolio.

Related Link: Earnings Beats Drive ETFs; LinkedIn Boosts Social Media ETF

iShares Dow Jones U.S. Regional Banks ETF IAT

The smaller banks led the sector ETFs with a gain of 1.1 percent and made an important move on the charts.

The ETF has remained above its 200-day moving average for years and in May the ETF pulled back to the indicator before rallying 10 percent. On Wednesday the ETF once again touched the 200-day moving average before rallying into the close, followed by more gains yesterday.

A purchase of IAT at the current level will give investors an extremely high reward versus risk setup. The ultimate stop-loss should be at the $32 area.

iShares MSCI Emerging Markets Index ETF EEM

The rally in the emerging markets continues with EEM trading at the best level since January 2013. The ETF is now up 21 percent from the early February low. It is in position to break above the January 2013 high and trade at its best level in three years.

Some analysts have been calling for a pullback in the emerging markets based on valuations. While everyone is entitled to their opinion, the numbers show the emerging markets to have lower valuation metrics than most developed markets and are expected to grow at a faster pace. Therefore, EEM appears to be set to break to that new three-year high.