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ETF/No Load Fund Tracker Newsletter For Friday, May 25, 2012

ETF/No Load Fund Tracker StatSheet





Market Commentary

Friday, May 25, 2012


Equity ETFs tumbled Friday but closed the week higher, snapping a three-week losing streak as investors concerns over a looming banking crisis in Spain overshadowed a surprisingly strong consumer sentiment reading.

Markets headed south after reports suggested that the final bill for bailing out Bankia of Spain came at €19 billion, stoking concerns over Greece’s continuation in the single currency union. US Treasuries rallied over reports that the Spanish regional governments are struggling to raise funds, fueling demand for US safe haven assets.

The Dow Jones Industrial Average (DJIA) shed 74.92 points to close at 12,454.83, up 0.7 percent for the week. The broad trend remained bearish with 22 stocks out of 30 in the blue chip index retreating.

The S&P 500 Index (SPX) dropped 2.86 points to 1317.82; still up 1.7 percent for the week. Industrials lagged the most while utilities and telecommunications came out on top.

The NASDAQ Composite Index (COMP) dropped 1.85 points to settle at 2837.53, 2.1 percent higher over last Friday.

Treasuries advanced after ratings agency Standard & Poor’s warned that Spain may slip into double-dip recession and downgraded five Spanish banks. US 10-year Treasury yield dropped 2 basis points to close at 1.74 percent. Yield on the benchmark Treasury closed two basis points higher for the week, the first since March 16.

ETFs in the news:

Brazil remained in the headlines today with top Japanese drug maker Takeda Pharmaceuticals announcing purchase of Brazil’s Multilab for up to $265 million. Also Spanish energy giant Repsol said Thursday it’s exploring a block off Brazilian coast that may hold 700 million barrels of light oil and 3 trillion cubic feet of gas.

Though the country’s currency has performed badly against the greenback, losing over 15 percent since February, the central bank sold $2 billion in currency swaps to prop up the reais.

The iShares MSCI Brazil Small Cap Index Fund (EWZS) remained among the day’s top gainers, adding an impressive 4.04 percent for the day. Another Brazil linked fund, the Global X Brazil Mid Cap ETF (BRAZ) also soared, rising 3.92 percent for the day. Both, however, remain deeply stuck in bear market territory.

Among the day’s top losers, funds linked to Indonesia came under selling pressure, ostensibly due to the ongoing European crisis. The iShares MSCI Indonesia Investable Market Index (EIDO) and the Market Vectors Indonesia Index ETF (IDX) bore the brunt of the European flip-flop, losing 5.90 and 5.82 percent respectively.

While the MSCI Emerging Markets Index has lost 2 percent since Jan, EIDO and IDX have plunged 8 percent and 11 percent, respectively. The country’s manufacturing output has slowed down in the first quarter, and weak external demand may drive GDP growth down to 5.8 to 6 percent in 2012 from the current forecast of 6.2 percent, according to Moody’s Analytics.

Our Trend Tracking Indexes (TTIs) continue to show a mixed picture. Domestically, we remain on the bullish side of the trend line while, internationally, we are meandering around in bear territory. What that means is that the US remains the cleanest shirt in the dirty laundry basked for the time being.

Here are this week’s closing numbers:

Domestic TTI: +2.00% (last week +1.47%)

International TTI: -4.24% (last week -5.08%)

It remains to be seen if the International TTI was the canary in the coalmine with the domestic cousin to follow at some point. Much will depend not on US data but the developments in the eurozone.

Have a great week.


Disclosure: No holdings



All Reader Q & A’s are listed at our web site!
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A note from reader Mark:

Q: Ulli: I have just recently started following your blogs and newsletters.  I find that you make a lot of sense with your investment advice, and I appreciate your efforts to communicate your investment wisdom to the public.

I have made some portfolio moves based on your suggestions, yet I am a little confused as to where you stand on VTI (of which I hold substantial amounts).

In your blog “US Equities Bounce Back From Worst Week Of The Year” on 05/22/12 you wrote that you “held on to VTI for the time being”, but your “7 ETF Model Portfolios You Can Use” on 05/23/12 shows that VTI was Action: Sold 05/18/12.  Perhaps I am not up to speed on the communication methods yet.  Is your current advice to the public to be holding VTI or to have sold VTI?

A: Mark: Yes, I should have been clearer on VTI and reiterated the fact that the sell point depends on when you bought the original position. The model portfolio VTI holdings were set up on 12/30/11 and signaled a sell as indicated when the drop of 7% from the highs occurred.

However, in my advisor practice, we purchased VTI at various dates thereafter, as new client money was invested, hence the difference in sale dates. So at this point, we have 99% of VTI sold and are holding only one position for one client, but that has reached the -6.19% level, so I anticipate that to be sold when the markets sink further.

Hope that clears it up.



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