A Mixed Monday Upon Service Sector News

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

U.S. equities slipped on Monday after a mixed batch of economic reports, which showed a slowdown in growth in the U.S. services sector and a rebound in new orders for factory goods. The pace of growth in the U.S. services sector slowed for a second straight month in December with business activity expanding at a lower rate and new orders contracting, according to the Institute for Supply Management. This data serves as a reminder that the U.S. economy is still battling headwinds on its road to recovery. European indices, meanwhile, finished largely lower on the day.

Leading Dow Jones Industrial Average (DJIA) performers included Goldman Sachs, up 0.70%, Verizon, up 0.63%, and JPMorgan Chase, up 0.58%. The Dow Jones Industrial Average’s (DJIA) worst performers included Microsoft, down 2.13%, Caterpillar, down 1.32%, and DuPont, down 1.24%.

Top movers in the ETF sector were (LBND) PowerShares DB 3x Long 25+ Year Treasury Bond ETN (+5.92%), (YANG) Direxion Daily China Bear 3X Shares  (+5.03%), and (DYY) PowerShares DB Commodity Double Long ETN (+4.95%). It seems as though changes in the Fed’s policy are resulting in increased activity throughout the bond ETF market.

As a political side note, the U.S. Senate is set to vote today to confirm Janet Yellen as the next chair of the Federal Reserve. Yellen, who has been the Fed’s vice chair since 2010, is poised to become the first woman to head the U.S. central bank. She is widely seen as continuing the policies set in place by Ben Bernanke, who will step down as Fed chairman at month’s end.

With the major indexes continuing their pullback, our 10 ETFs in the Spotlight followed suit. 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)

Our Trend Tracking Indexes (TTIs) pulled back as well but remain above their long term trend lines by the following percentages:

Domestic TTI: +3.93% (last close +4.09%)

International TTI: +6.13% (last close +6.20%)


Contact Ulli

Leave a Reply