With the markets having sustained losses for 5 straight days, it’s no surprise that the number of ETFs hovering above the cutline has been severely reduced from the prior report.
This week, there are 188 ETFs listed above the cutline (down from 321) and 208 below it (up from 75), which is a clear indication of a change in market direction. Whether that will be sustained is still wide open and currently depends on the outcome of the debt ceiling debate. As I am writing this (Sunday afternoon), indications are surfacing that a compromise across party lines indeed may have been reached, but the final word has not been spoken yet.
Should this compromise materialize, we will certainly see a euphoric reaction rebound on Wall Street. However, how long this will last in the face of the recent poor GDP news, while a questionable jobs report is lurking on the horizon, is the big unknown.
Even as Wall Street got clobbered, some ETFs have resisted the selloff, as you can see in this new expanded ETF Cutline report:
http://www.successful-investment.com/SSTables/ETFMasterCutline07292011.pdf
Several ETFs are sporting positive momentum numbers along with 0.00% in the DD% column.
While in my view the odds are greatly enhanced to invest in ETFs with positive momentum numbers, there is simply no guarantee that their up trend will continue. It’s therefore imperative that you employ my recommended trailing sell stop discipline, to limit downside risk, should you encounter adverse market conditions.
Along the same lines, consider that in these times of uncertainty, there is nothing wrong with temporarily having a higher cash position, until better opportunities present themselves. That holds especially true during the upcoming week, during which some of the existing uncertainties may possibly be resolved (debt ceiling), while new ones may appear (jobs report).
Reference: “How do I use the ETF Cutline Table to make a Buy decision”
Previous posts:
ETF Cutline Post as of 7/22/2011
ETF Cutline Post as of 7/15/2011
ETF Cutline Post as of 7/8/2011
ETF Cutline Post as of 7/1/2011
ETF Cutline Post as of 6/24/2011
ETF Cutline Post as of 6/17/2011
ETF Cutline Post as of 6/10/2011
ETF Cutline Post as of 6/3/2011
ETF Cutline Post as of 5/27/2011
ETF Cutline Post as of 5/20/2011
ETF Cutline Post as of 5/13/2011
ETF Cutline Post as of 5/6/2011
ETF Cutline Post as of 4/29/2011
ETF Cutline Post as of 4/21/2011
ETF Cutline Post as of 4/15/2011
ETF Cutline Post as of 4/8/2011
ETF Cutline Post as of 4/4/2011
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Comments 2
Ulli: Thanks for your wonderful website. In your practice, how do you manage the fixed income component. Suppose a conservative investory wants a maximum of 40% for stocke exposure, how do you handle the fixed income component. From your writings it seems that you do not manage money based on the mix between stocks and bonds. Can you please elaborate on how you mange your clinents’ money.
Anon,
In a nutshell, I prefer managing for growth, because managing for income assumes for you to be the market all the time, which will be a losing proposition during bearish periods. Those clients that need income, make withdrawals on a need to basis.
Ulli…