ETF/No Load Fund Tracker StatSheet
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Market Commentary
Friday, September 21, 2012
MAJOR MARKET ETFS POST FIRST WEEKLY DECLINE IN SEPTEMBER; EUROPE RISES ON SPAIN RUMORS
The major market ETFs posted its first weekly decline for the month, erasing earlier gains Friday. Most indexes closed the day near flat with the S&P 500 dropping for the fourth time in five days as banks tanked and a rally in smart phone maker Apple fizzled.
Despite hitting a five-year high in early trading, the Dow Jones Industrial Average (DJIA) shed 17 points. Breadth within the 30-stock index turned negative with decliners overshadowing gainers 17 to 13 for the day. The blue-chip index closed 0.1 percent lower over last Friday’s close.
The S&P 500 Index (SPX) closed fractionally lower over Thursday’s close and off 0.4 percent for the week, with materials hitting the ground hardest and telecommunications fronting the winners for the day among its 10 business groups.
Treasuries extended a reversal of last week’s sell off to reclaim most of the losses as worries over global economic recovery gained ground following Spain’s delay in seeking a formal bailout.
Yield on the benchmark 10-year Treasury fell one basis point to 1.76 percent after rising as much as three basis points in early session. Down 11 basis points for the week, the benchmark yield is at its level just before the Federal Reserve announced its plans to buy further MBSs and extend low interest rates to 2015.
Meanwhile, the US dollar gave away gains over the euro on Friday following a Financial Times report Spain and the European Union officials are working on a reform plan that could be unveiled as early as next week to facilitate an official bailout next month.
European stock markets rallied, helped by drug makers and banks following media reports Spain is setting the stage for a formal bailout request. The Stoxx Europe 600 index jumped 0.5 percent even though the pan-European benchmark finished 0.1 percent lower over last Friday.
Up 0.5 percent for the week, the DAX 30 index rose 0.8 percent in Frankfurt on Friday, helped by lenders Deutsche Bank and Commerzbank and Pharma and chemical firm Bayer AG.
In the ETF space, homebuilder-linked funds surged after KB Homes (KBH) reported blockbuster Q3 results. KBH flew 17 percent after the home builder reported 4 cents per share profit contrary to loss estimates.
The iShares Dow Jones U.S. Home Construction Index Fund (ITB) surged 1.88 percent, capping its seventh straight week of gains. ITB has gained 14 percent so far this month versus the 3.5 percent gain for the S&P 500. The State Street SPDR Homebuilders ETF (XHB) rose 0.86 percent on the day.
Our Trend Tracking Indexes (TTIs) maintained their strong position on the bullish side of the trend line and closed out the week as follows:
Domestic TTI: +3.88% (last week +3.80%)
International TTI: +5.05% (last week +6.24%)
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 Lise:
Q: Ulli: have been on the sidelines for the past year in my investments waiting for the other shoe to drop. It now seems with this QE3 unlimited that the markets are going to trend
up higher at least short term 3- 6 months…
Do you think it would be a good time to jump in at least in a small way – or wait until the market corrects before getting back in? I know you can’t predict the future but let’s face it- things are pretty bad everywhere so I would appreciate your opinion.
Thanks in advance- I really like all your commentary.
A: Lise: This might be the worst time of the year to add any equity positions with the notoriously volatile October staring us in the face. You’ve waited this long, why not wait a little longer until we get to the historically stronger market season starting in November or so?
Unless you are very aggressive and execute a strict sell stop discipline, I would not add new equities at these highly elevated levels.
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Contact Ulli
Comments 1
Lise, I am in the same position – being to cautious and now have a lot of cash ready to put to work. However, from everything I’ve seen, the market is very risky now, and it would be best to purchase on a pullback. One advisor I follow recommends the following:
S&P 1420 – buy 25% of position. If market turns back up add
balance of position
S&P 1405 – buy additional 25% of position. If market turns up
add remaining balance of position.
S&P 1390 – buy additional 25% of position. If market turns up
add remaining balance of position.
S&P 1370 – buy final 25% of position. If market turns up add
remaining balance of position. IF market continues to fall –
look for your sell stops to get you out.
Ulli – your thoughts?