ETF Expert

Far too often, writers get wrapped up in the machinations of stock market participation. Did evil computers conspire to drag equities in the Dow down 1000 points? Or was it the “fat finger” on Procter & Gamble shares?

Ignored in the stock juggernaut was the reality that intra-day price volatility had been increasing for weeks, key trendlines had been breaking down, and the CBOE Volatility Index (VIX) had closed above its 50-Day MA back in April. I had been explaining these changes to Pacific Park asset management clients and ETF Risk Alert readers in the weeks leading up to the “mini-crash.”

Now that the Europe contagion fear would appear to be “off the table,” investors can get back to worrying about other issues. Will China be forced to continue on a course of restricting credit? Will offshore drilling woes result in dramatically higher oil prices? Will new financial regulations help or hinder “Wall Street?”

Perhaps ironically, when we attempt to answer these and other questions, we often become myopic; that is, we tend to focus on the impact to stock assets alone. Yet there are quite a few other asset classes that deserve attention in periods of uncertainty.

Here are 2 ETFs that are important to look at right now:

1. CurrencyShares Canadian Dollar Trust (FXC). Most currencies tend to rise in tandem against the U.S. dollar as the “US Dollar Index” weakens… most tend to fall in tandem when the “U.S. Dollar Index” strengthens. This has not necessarily been the case with FXC.

Over the last 5 days, in the heat of the flight to safety of the US Dollar Index via PowerShares Dollar Bullish (UUP), the Canadian Dollar Trust (FXC) gained about 1% against the greenback. It’s up 6% against Uncle Buck over 6 months of sovereign debt concerns, even as UUP has garnered 8%+ against a world basket of currencies. How well might FXC do when the U.S. dollar resumes a course of weakening?

2. ETF Securities Physical Platinum (PPLT). Although platinum surged out of the 2010 gate, pushing the ratio of gold’s price from 0.74 to 0.66 in the first four months, that ratio has moved back to 0.70. And yet, while there’s no perfect ratio here, 0.575 seems to have a great deal of support. Platinum would have to rise faster than gold to make it happen.

Keep in mind, according to Tom Lydon at ETF Trends, demand for platinum jewelry increased 38% in 2009 over 2008. There’s very little evidence of short selling on Physical Platinum (PPLT). And PPLT has bounced off its near-term 50-Day MA.

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