ETF/No Load Fund Tracker StatSheet
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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:
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Market Commentary
Friday, October 21, 2011
SHATTERING THE GLASS CEILING—IS THE BREAKOUT FOR REAL?
After a turbulent week, markets ended on a cheery note as the S&P 500 gained 1.88%. The index traded between 1,190 and 1,240 for the week, going on a bit of a rollercoaster to say the least. Meanwhile, oil and gold went up 1.70% and 1.74%, respectively.
In a week where the VIX swung up and down over 9% for four out of five days, we are back into risk mode. The continued uncertainty, especially from Europe, makes an entry point for equities difficult in the current environment.
Strong corporate earnings brought some upside to equities in the U.S., but the same can’t be said on the other side of the Pacific. China’s Shanghai Composite Index had its worst week in five months after concerns about an economic slowdown adversely impacted markets, especially the below expected third quarter GDP announced earlier this week.
Weakness on the commodity and energy front as well as monetary tightening is creating some headwinds for the Chinese economy that will be closely watched over the next few months. Yet, most eyes are still on Europe.
Eurozone leaders took a progressive step by expanding the EFSF, but the next challenge lies in how they will fund the expansion given opposition by non-Euro nations to providing bailout funding via IMF. In the meantime, the Eurozone is planning on combining the EFSF and the planned European Stability Mechanism, which would cumulatively account for $1.3 trillion in funding.
However, as I’ve previously mentioned, Europe’s current solution is merely a bandage that doesn’t address long-term structural debt issues. In its drawn out tragedy, Greece is currently forecast to be north of 170% of GDP by next year at the going rate and, unless debt holders are willing to take a steep haircut, austerity measures will surely not be enough to reduce long-term debt to a sustainable level.
If investors seem unwilling to share the loss burden, Greece might as well throw up the white flag and surrender to default. In other words, I am not discounting the possibility that European contagion may spread sooner rather than later to the U.S. and infect equities.
Nonetheless, the Domestic Trend Tracking Index (TTI) has now clearly pierced its long-term trend line by +1.76%, while the 2 months trading range of the S&P 500 has been broken to the upside. Barring any sudden shocks to the market early next week, the domestic trend is now positive, and I will likely issue a ‘Buy’ signal for that arena. Stay tuned and look for more details in Monday’s market commentary.
In the meantime, the unsettling situation in Europe means I’ll be looking toward this Sunday’s Summit among EU leaders to see if a credible debt resolution gets hashed out and how that may affect markets heading into next week.
I will also be travelling back from Germany this Sunday and plan to let myself be surprised at what these European can kickers will come up with this time. At best, they could make some necessary hard decisions (I doubt it), while at worst, they may agree to meet again in the future.
Have a great week.
Ulli…
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READER Q & A FOR THE WEEK
All Reader Q & A’s are listed at our web site!
Check it out at:
http://www.successful-investment.com/q&a.php
A note from reader “C”:
Q: Ulli: I have not seen the Hi Volume ETF on the Cutline report since 9/1. Are you still making it available? If so, where is it to be found? I now receive all of your mailings. Have I overlooked it?
Thanks for your help and wonderful free service.
A: “C”: I did announce a couple of weeks ago that, while we were at the lower part at the trading range, I would suspend the Cutline reports temporarily, since there was nothing to look at but red numbers.
With the markets having rallied, I have posted the cutline updates again this past week, but the links have become part of my market commentary. Be sure to look for it in the late afternoon PST.
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