ETF Outlook for October 4, 2013

PowerShares DB US Dollar Index Bullish ETF UUP

The US Dollar continues to fall and the ETF closed at the lowest level since November 2011 yesterday. As the government shutdown drags on it could have an adverse affect on the economy and thus keep the Fed from tapering any time soon. More asset purchases by the Fed and a slowing US economy are both negative for the greenback. If the shutdown becomes a prolonged event and/or the debt ceiling debate becomes an issue the inverse ETF should continue to outperform – PowerShares DB US Bearish ETF UDN.

iShares Dow Jones US Aerospace & Defense Index ETF ITA

The government shutdown may not have a direct affect on most Americans as long as they still have a job to go to every morning. However, there are certain sectors that have been hit hard by the shutdown; the aerospace & defense stocks that rely heavily on government money is an example. ITA has fallen nearly 5% in the last two weeks and there could be more selling if politicians do not come to an agreement soon.

Unites States Oil Fund USO

The fund tracks the price of west Texas intermediate crude oil and based on early trading it should be higher this morning. The reason for the jump higher has to do with the tropical storm Karen set to become a hurricane in the Gulf of Mexico. Several energy companies are evacuating oil and gas platforms in the Gulf, which will lead to less production. The storm does not look to be too severe and the short-term bounce may be just that, short-term.

SPDR Select Sector Financial ETF XLF

More negative news for the large, diversified financial stocks as Evercore cuts JP Morgan JPM estimates. Over the last few weeks a number of analysts have been critical of JPM and its peers and it has led to XLF lagging the market. The ETF is down 4% in the last two weeks. If the ETF pulls back to the $19.40 area it could result in a solid buying opportunity heading into the heart of earnings season now that estimates have been lowered. This ETF should be watching closely in the coming week to see if it bounces off the $19.50 area.