Major Market ETFs Extend Losses On Weak Economic Data; GDX Soars, IWM Slips

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Major market ETFs got spanked on Thursday closing lower for the fifth straight day with the Dow industrials retreating for the 11th out of 12 sessions when the Philly Fed manufacturing index contracted unexpectedly to -5.8 in May from 8.5 in April as export growth slowed.

Treasury 10-year yields headed towards record lows as Greece’s future membership in the single-currency union continues to spook investors, spurring demand for safe haven US assets.

The Dow Jones Industrial Average (DJIA) tumbled 156.06 points, and the S&P 500 Index (SPX) slipped 1.5 percent, its lowest in four months. Consumer discretionary  fared the worst among the index’s 10 business groups.

The tech-heavy NASDAQ Composite Index (COMP) receded 2.1 percent to end at 2,813.69.

Yield on the benchmark 10-year Treasuries dropped 6 basis points to 1.70 percent, the lowest since Sept. 23 when yields dropped to 1.67 percent. Yield on 30-year bonds tumbled 9 basis points to 2.81 percent, lowest since Dec. 20.

ETFs in the news:

Among the day’s top gainers, the Van Eck Market Vectors TR Gold Miners ETF (GDX) remained on top after rallying 4.5 percent. GDX invests in high-beta mining stocks and gains or losses are magnified depending on the yellow metal’s movement.

As gold futures jumped 2.5 percent today, the mining fund locked onto the high-beta advantage. Today’s positive movement helped the ETF to double its average daily volume though GDX is down 19 percent since January.

The Market Vectors Junior Gold Miners ETF (GDXJ) that invests in medium and small cap mining companies only also moved north, adding an impressive 3.97 percent.

As markets turned increasingly choppy, the S&P 500 VIX Short-Term Futures ETN (VXX) continued to pile on gains. VXX added 4.63 percent today as the CBOE volatility index touched 24.49 today, up 9.97 percent. However, despite its recent gains, VXX has lost 40.90 percent on the year.

Among the day’s top losers, the iShares Russell 2000 Index Fund (IWM) was the worst, shedding 2.27 percent for the day. IWM tracks the Russell 2000 Index which consists of 2000 of US small cap equities.

Following JP Morgan’s $2 billion trading loss announcement, financial ETFs are on their heels. The State Street Financial Select Sector SPDR (XLF) lost 2.04 percent today as financial ETFs across the board retreated. Both the Vanguard Financials Index Fund (VFH) and the iShares Dow Jones US Financial Sector Index Fund (IYF) shed 2.12 percent as investor risk appetite diminished.

Our International Sell signal, effective 5/15/12, proved to be right on the money as the respective TTI has sunk deeper and sits now -4.46% below its long-term trend line.

On the domestic front, weakness seems to be accelerating as the S&P 500 closed at the lows for the day (see chart above), which could translate into a sloppy opening tomorrow. Our Domestic TTI, while still on the bullish side by +1.84%, is showing signs of fatigue, and it may very well just be a matter of time before we see a Sell signal there as well.

I’ve been harping on the same theme over and over: Make sure you follow your trailing sell stops and execute them when they triggered! Sure, the hope is that once the markets drop another 2-3%, the Fed will step in again and rescue Wall Street with another punch bowl serving. But, what if they don’t?

Disclosure: No holdings

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