•                   Home
  • Watchlist Update
  • Economic Calendar
  • Popular Posts
  • About

Interesting ETFs for 2019: HYG, EEM, FXB


High Yield Corporate Bond ETF HYG, $84.41.

In the present scenario of global economic slowdown, some signs of a recession (for example, yield curve investment) are appearing in the US. The FED finally understood it and adopted a sudden and strong tone dovish for this year, so many analysts in wall Street estimate that this year it's possible not to give any Rate Hike. This would be very beneficial for the bonds, of all types, ratings and maturity: the short-term ones that depend on these rate increases and the long ones that do so on inflation, which is expected to be slowed down with this probably decision of the FED. This week is the FOMC meeting and it must give its first announcement of the year, and most important, the guidance for 2019.

For risky or less conservative traders, high-yield corporate bonds, or junk bonds, followed by the HYG ETF, are a good option for their portfolio, since this fund take a universe of several BB to Ba rating companies that relieves us of the job of looking for specific corporate bonds. The most conservative traders can opt for the LQD ETF that follows the investment-grade bonds.

As seen in its daily chart, HYG did not have a good 2018, but its rebound, due to the 'new' dovish FED at the end of the year, has been powerful, almost 6%, and is about to overcome the Ichimoku cloud, in bull territory. Its next and crucial resistance is the SMA200 average at $84.96. These weeks, only if the risk of recession begins to decrease, is the best moment to invest in this ETF for the short-term, before the bond yields decreases. Even taking into account that, 
according to Moody's, the annual defaults rate for speculative-grade debt is at very low historical levels, around 2%, when the average is close to 5%. 


Emerging Markets Index EEM, $42.20

Another good bet for this year are the emerging markets, both in fixed and variable income. As seen in the weekly chart, the emerging ones had a very hard 2018 (-15% drop), but this 2019 can be very different, specially for Asia. As an excluding factor, there is a real possibility of not having rate hikes in the US this year with the consequent weakening of the dollar, generally inverse to commodities, the strong element of emerging economies. If we add to this the US-China agreement, which at some point of the year should occur, the prospects can not be better for these markets. The ETF is very well diversified by regions and sectors, and avoids deciding for a stock or bond of each specific company.

Consequence of this optimistic vision, technically, the EEM index has been recovering strongly since January, already surpassing its SMA200 average and 23.6% of its Fibonacci, approaching its SMA50 and 100 as next resistance. The conditions seem given to be long in this ETF for all this 2019. 


Hint: follow US economic events this week, as earnings "superweek", FOMC Meeting Announcement and GDP on Wednesday and Employment data on Friday. There will give important cues for the future behavior of that country. Do it before any trade decision in this instruments.





Currency Pound Sterling ETF FXB, $128.14

When all the investors were worried about the recent vote of the Brexit (catastrophic defeat for Theresa May) and its repercussion on the pound, it reacted surprisingly well, considering the complicated political situation in that country. It seems that finally, the historic decision was a balm for the British stock market and the pound, because clarified the way, and today it's almost certain that the harmful option of Hard Brexit will not be given, but a consensus agreement between all the parties. Be alert as the debate continues in the English Parliament this week, and their decisions will move markets.

In its daily chart, FXB, the ETF that follows the pound, is soaring, surpassing on Friday its SMA200 average and is about to leave its mid-year ranging price with its resistance at $128. Remember that the pound touched a minimum of 30 years in mid-2016 (with the news of Brexit) and has the field to recover that gap.  Forex traders must be trading the pound against all its pairs. I, who do not use forex, plan to enter for a short-term in FXB on news of a deal this week in the UK.