Bonds Drop As Index Leaders Play Musical Chairs

Ulli Market Commentary 1 Comment

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

Emerging-market stocks dropped to a one-month low, led by Turkish equities, on concern that a slower expansion in the euro area will crimp global growth. While Bond ETFs have risen from the dead, they still are hovering below their long-term trend lines and are not in a buy mode at this time. However, the consensus seems to be that the Fed’s taper decision has been put off until 2014, whih may have opened the door for potential asset flows back into fixed income.

The SPDR S&P 500 ETF (SPY) and PowerShares QQQ have continued to push to new highs and remain in healthy uptrends.

Right now we are seeing small rotations in index leadership, which may be a sign of institutional investors starting to jockey for position before the end of the year. What I think we will see through the remaining two months of 2013 is a push/pull between the latecomers who are chasing performance and the early adopters who are looking to lock in gains on their positions.

Let’s review the new ETF section below:

2. ETFs in the Spotlight

In case you missed the announcement and description of this section, you can read it here again.

It features 10 broadly diversified ETFs from my HighVolume list as posted every Monday. Furthermore, they are screened for the lowest MaxDD% number meaning they have been showing better resistance to temporary sell offs than all others over the past year.

In other words, all of them never triggered their 7.5% sell stop level during this time period, which included a variety of severe market pullbacks but no move into outright bear market territory.

Here are the 10 candidates:

MaxDD

All of them are in “buy” mode meaning their prices are above their respective long term trend lines by the percentage indicated (%M/A).

Now let’s look at the MaxDD% column and review the ETF with the lowest drawdown as an example. As you can see, that would be XLY with the lowest MaxDD% number of -5.73%, which occurred on 11/15/2012.

The recent sell off in the month of June did not affect XLY at all as its “worst” MaxDD% of -5.73% still stands since the November 2012 sell off.

A quick glance at the last column showing the date of occurrences confirms that five of these ETFs had their worst drawdown in November 2012, while the other five were affected by the June 2013 swoon, however, none of them dipped below their -7.5% sell stop.

Year to date, here’s how the above candidates have fared so far:

YTD

3. Domestic Trend Tracking Indexes (TTIs)

Trend wise, our Trend Tracking Indexes (TTIs) slipped but remain above their long term trend lines by the following percentages:

Domestic TTI: +4.37%

International TTI: +7.08%

Disclosure: I am obliged to inform you that I, as well as advisory clients of mine, own some of these listed ETFs. Furthermore, they do not represent a specific investment recommendation for you, they merely show which ETFs from the universe I track are falling within the guidelines specified.

 

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