Posted on Tuesday, December 18th, 2012 | In Exchange Traded Funds
ETF investing proves lucrative today as the fiscal cliff approaches.
ETF investing and stock investing have been challenging lately as the fiscal cliff headlines rock world markets.
Today was no exception as stocks and ETFs rose on hopes that Congress and the White House can reach an agreement to avoid the fiscal cliff.
Major U.S. indexes rose sharply although no deal has been formally reach that could prove positive for ETF investing. Read “Fiscal Cliff Progress Boosts Stocks
Negotiations continued even as Republicans in the House floated a “Plan B” that would raise taxes for people earning more than a million a year, however, this plan was immediately rejected by the Democrats on Capitol Hill.
ETF investing proved to be a profitable venture today as the Dow Jones Industrial Average (NYSEARCA:DIA) jumped 0.87%, the S&P 500 (NYSEARCA:SPY) climbed 1.15%, the Nasdaq 100 (NYSEARCA:QQQ) advanced 1.54% and the Russell 2000 (NYSEARCA:IWM) rose 1.52%.
In other major markets, gold (NYSEARCA:GLD) fell -1.59% to $1672 and oil (NYSEARCA:USO) gained 0.51% to $88.43/bbl.
The big question now for ETF investing is will a settlement of the fiscal cliff turn out to be a “buy the rumor, sell the news” event, or can the market continue its climb through significant short term resistance just above current levels?
All in all, the fiscal cliff makes for great drama as President Obama hiked his offer to raise taxes on those earning $400,000, up from his long held position of $250,000 and the Republicans countered with their “Plan B,” among other proposals to cut spending and raise revenue.
In light economic news today, the National Association of Home Builders index rose to confirm a string of recent positive reports regarding the housing market. Read “Home Builder Confidence Rises”
On a technical basis, the S@P 500 (NYSEARCA:SPY) remains in a trading range and just below significant resistance levels at the 1460-1470 level and failure to advance here could lead to another correction sometime soon, most likely after the New Year.
Tomorrow’s economic reports are light with just November Housing Starts on tap and ETF investing will likely take a back seat to Christmas shopping and the fiscal cliff debate.
Bottom line: Major U.S. stock indexes are at a critical inflection point for ETF investing as the current seasonal rally now reaches significant resistance levels. Near term action will be critical in determining the market’s next directional move.
About John Nyaradi (http://www.wallstreetsectorselector.com)
John Nyaradi is Publisher of Wall Street Sector Selector: Your Home For ETF Investing! John writes a weekly guest column, John Nyaradi’s ETF Edge for MarketWatch.com and his investment articles have appeared in many online publications including Trading Markets, Money Show, Yahoo Finance, Investors Insight, Fidelity, ETF Daily News, iStock Analyst , among many others. His book, Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFs, is published by John Wiley and Sons and included among the Years Top Investment Books in the 2011 Stock Trader’s Almanac.