ETF/No Load Fund Tracker StatSheet
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Market Commentary
Friday, June 1, 2012
QE3 POSSIBILITY GOES UP AS ECONOMY SHOWS SIGNS OF SLOWDOWN; GDXJ SHINES, ITB TUMBLES
On the first trading day of June, US stocks plummeted by over 2 percent Friday to register the worst day of 2012 with the Dow slipping into the red, wiping off gains for the year after a Labor Department report showed fewer jobs were added than anticipated.
The S&P 500 and the NASDAQ are off more than 10 percent from the year’s highs, moving into the so-called correction territory, as investors sought refuge in gold and Treasuries. Yield on 30-year bond dropped to record lows after the May reading of ISM Manufacturing Index dropped to 53.5 against an estimated 54.
The Dow Jones Industrial Average (DJIA) plummeted 2.2 percent to 12,118.57, the biggest one-day drop since November. The index wiped off all the gains for 2012, trading nearly 100 points lower than the start of the year. All of its 30 components closed lower for the day.
The S&P 500 Index (SPX) slipped 2.5 percent, recording its biggest loss in six months. The index however managed to remain in the positive territory, higher 1.6 percent for the year.
The tech-heavy NASDAQ Composite Index (COMP) lost 2.8 percent to end at 2747.48. The index is still up 5.5 percent year-to-date, thanks to solid gains made in the first quarter.
Treasury yields touched new lows after the Markit Purchasing Managers Index showed European manufacturing activity shrank highest in three years in May. The benchmark 10-year Treasury yields dropped nine basis points to a new all-time low of 1.47 percent in the afternoon trade. Yield on 30-year bonds dropped 10 basis points to 2.54 percent.
ETFs in the news:
As jobs data for May disappointed, Treasuries and gold prices soared, pushing gold miners higher. Among the day’s top gainers, the Van Eck Market Vectors Junior Gold Miners ETF (GDXJ) sizzled, vaulting 6.94 percent for the day. The Van Eck Market Vectors TR Gold Miners (GDX) also moved fast and furious and added 6.4 percent for the day.
Bullion linked funds made progress during the day as the yellow metal breached the $1,600-an-ounce level after weeks. The State Street SPDR Gold Trust (GLD) jumped 3.88 percent for the day as gold futures for August delivery nearly rose 4 percent.
The weaker than expected jobs report for May took its toll on the home builders. The iShares Dow Jones U.S. Home Construction Index Fund (ITB) crashed, losing 6.22 percent for the day. The day’s trading volume was more than twice the average as investors anticipated lower home sales on weak jobs data. However, ITB remains solidly in the positive territory for the year, up more than 20 percent since January.
Other home builder linked products like the State Street SPDR S&P Home builders ETF (XHB) tumbled 5.65 percent after its top holdings PulteGroup and Lennar Corp sank 11.75 percent and 8.32 percent respectively. Despite today’s thrashing, XHB is up 14.27 percent for the year.
The State Street Financial Select Sector SPDR (XLF) featured among the biggest losers, slipping 3.71 percent for the day.
Our Trend Tracking Indexes (TTIs) headed further south as well. Domestically, we remain on the bullish side of the trend line while, internationally, we are sinking deeper into bear territory.
Here are this week’s closing numbers:
Domestic TTI: +1.24% (last week +2.00%)
International TTI: -6.73% (last week -4.24%)
Technically speaking, some serious damage was done, as the S&P 500, the Dow Jones Industrials and the Transportation Index all broke below their widely followed 200-day moving averages, which may invite more selling and which may subsequently push our Domestic TTI over the edge as well.
Not helping matters was the fact the markets showed no rebound ability late in the session, closing at the lows, which does not bode well for next week’s opening.
Speaking of next week, you can expect to hear some howling on the Street for more stimulus as downward momentum appears to accelerate. For the nth time, if you do your own investing, are you executing your trailing sell stops?
Have a great week.
Ulli…
Disclosure: No holdings
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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 Doug:
Q: Ulli: I’ve been following your #1 portfolio based mainly on PRPFX. I’m wondering if the series of drops of PRPFX last week is triggering a sell for you, or are you going to see if it bounces this week?
A: Doug: We came close to selling PRPFX in our model portfolios a week ago. It had dropped -7.25% off its high, but I decided to hold on another day—just like I did with VTI.
I ended up liquidating it on 5/31, as it had reached almost the -7.5% point.
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