ETF/No Load Fund Tracker Newsletter For Friday, January 24, 2014

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Market Commentary

Friday, January 24, 2014


Fri pic

[Chart courtesy of]

1. Moving The Markets

Well, it was a poor end to a mediocre week in the U.S. stock market. U.S. stocks experienced their largest daily drop of the year with the S&P falling 2.09%, the Dow -1.96% and the Nasdaq -2.15%. The chart above shows the impact of the entire last five trading days. This officially marks the worst week for benchmark indexes since 2012. What is going on?

Many analysts place the blame on increased volatility in global markets, which sparked a large sell-off of developing-nation currencies. The Volatility S&P 500 (VIX) index was up 31% today, which adds fuel to the ‘anticipated volatility’ fire. Major markets in Europe and Asia also closed lower and remember that we also had weak growth numbers come out of China yesterday.

Others say that this is the correction we have been waiting for. Let us not forget the old saying “as goes January, so goes the year.” With only five days of trading left this month and with the S&P down 50 points (-3%) the old January effect saying might indicate that we are in for a rough ride this year. This should make for an interesting next week of trading; it is crucial that you have your exit strategy in place and execute your plan should your sell stops get triggered.

Our 10 ETFs in the Spotlight headed south but none of them triggered a “Sell,”, although some have come close as the table below shows.

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 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:


3. Domestic Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) joined the downward momentum, but they remain on the bullish side of their respective trend lines:

Domestic TTI: +2.67% (last Friday +4.01%)

International TTI: +4.34% (last Friday +6.79%)

Have a great week.


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.



All Reader Q & A’s are listed at our web site!
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A note from reader Don:

Q: Ulli: Is your 39 week moving average really a 195 day moving average?  (39 weeks x 5 trading days per week = 195)

A: Don: There is a small difference. With a 39-week M/A, you recalculate the average only every Friday while when using a 195 day M/A, you would recalculate every day. I prefer the former, though in the end it may not make that much difference. Whatever you prefer, you should use.



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