Investors Optimistic As We Head Into 2014

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of]

1. Moving The Markets

After years, in which financial markets lurched from the debt crisis in Europe to U.S. political deadlock, investors are generally becoming more upbeat on the global economic outlook. However, U.S. equity indices closed flat on Monday as light trading heading into the New Year holiday left many market participants on the sidelines at the end of what is expected to be the best year for stocks since 1997. The S&P 500 is up sharply YTD, and many investment strategists remain positive that the market will post another gain in 2014.

U.S. benchmark yields slipped below the 3 percent threshold after they hit a two-year high last week on expectations of improving domestic growth as the Federal Reserve begins to pare its massive bond-purchase stimulus in January. Views on economic improvement further reduced the appeal of gold, which will record its biggest annual loss in 32 years. Oil prices fell to near $111 a barrel in London on signs crude exports from Libya might return to normal due to a possible end to a four-month blockage of a key port.

In the ETF world, iShares, the exchange-traded funds platform of BlackRock, has announced the launch of the iShares Euro Stoxx 50 ex-Financials UCITS ETF (EXFN). The fund, listed on the London Stock Exchange, offers investors access to large-cap Eurozone equities whilst stripping out financial exposures such as banks and insurance companies. The fund will be Europe’s first ETF to come to market with an international security structure.

With the continuation of recent upside momentum in equities, seven of our ten ETFs in the Spotlight made new highs today. Take a look at the YTD table 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, none of them ever 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:


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 sell off in the month of June 2013 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:


3. Domestic Trend Tracking Indexes (TTIs)

Looking at the big picture, our Trend Tracking Indexes (TTIs) continue to advance with the overall positive tone in the market and remain above their long term trend lines by the following percentages:

Domestic TTI: +4.68% (last close +4.58%)

International TTI: +7.31% (last close +7.05%)

Contact Ulli

Leave a Reply