Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 10/06/2011

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ETF/Mutual Fund Data updated through Thursday, October 6, 2011

If you are not familiar with some of the terminology used, please see the Glossary of Terms.

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: SELL — since 8/9/2011

The domestic TTI broke through its long-term trend line generating a Sell for this area effective 8/9/2011. Over the recent past, we’ve seen the TTI hovering slightly below and above this dividing line between bullish and bearish territory. I will not issue a new Buy signal until this index has clearly pierced the trend line to the upside and has remained there.

As of today, our Trend Tracking Index (TTI—green line in above chart) has broken back above its long term trend line (red) by +0.05%.

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Another Pop For Equity ETFs, But Will It Last? Standard & Poor’s Forecasts Further Drop

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For the third consecutive trading session, markets remained in the green, giving some hope for equities. Once again, major indices and commodities rose with the S&P 500 gaining 1.83%, while the U.S. dollar slightly depreciated to $1.34/euro.

Today’s gains were possibly in part due to strong September sales figures from major U.S. retailers that exceeded expectations, suggesting a potential rebound in consumer spending to lift the economy. Furthermore, talks of European bank aid propelled markets into positive territory.

However, this short-term optimism seems premature especially ahead of Friday’s jobs numbers. Plus, Europe’s uncertain long-term plan on how to deal with mounting debt is worrisome, especially with Germany’s insistence on banks trying to fix their own balance sheets and for European investors to bear more of the burden in the case of a Greek bailout.

At this time, I see no reason to jump back into equities. The position of our Trend Tracking Indexes support that view.

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The Calm Before the Storm—Stay In Cash Or Retreat to Safer Non-Equity ETFs

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[Chart courtesy of MarketWatch.com]

Markets continued to ride yesterday’s reversal, as major index ETFs and commodities such as gold and oil posted sizeable gains (S&P 500 up 1.79%, oil up 5.35%) while volatility subsided (VIX down over 7.5%).

However, this short-term market upswing appears to have little credence in the midst of a serious European debt crisis where there is a probable near term negative shock to the stock market as a Greek default becomes more likely.

Meanwhile, it has been suggested that a $2 trillion funding line through the EFSF is deemed necessary to address overall European debt. Also, the possibility of Franco-Belgian bank Dexia failing, despite having passed stress tests a few months back, can create a Lehman-esque scenario in Europe.

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7 ETF Model Portfolios You Can Use – Updated through 10/4/2011

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Another 2% market drop, since last Wednesday’s report, moved our ETF Model Portfolios only slightly. The reason is, of course, that we have been stopped out of all volatile positions over the past few weeks and are now only invested in a few bond ETFs.

We sold the world bond BWX in portfolio #4 yesterday, as it had dropped off its high by some -6.5%. Remember, for bond ETFs, my preferred sell stop point is 5%, as opposed to 7% for equities.

With all portfolios, we are now in a holding pattern waiting for new opportunities to develop. I see those mainly in certain bond ETFs and possibly the U.S. dollar.

Take a look at the latest numbers:

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Equity ETFs Tank—Then Rebound Sharply In Last Hour

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[Chart courtesy of MarketWatch.com]

Note: Gold and oil prices in above chart reflect the evening session

One of the most frequently asked questions I have received since the beginning of our Domestic Sell Signal, which was effective 8/9/11, is why I don’t recommend using inverse ETFs, such as SH for the S&P 500, to take advantage of bear market conditions.

My answer is always the same. It looks like a good idea on the surface when reviewing charts of past bear markets. However, what you don’t see is the tremendous volatility that comes with bear markets via sudden reversal days and sharp up moves, which make this a proposition for only those with an aggressive risk profile.

Today was typical for that type of bear market behavior as the Dow swung within a 400 point range, while the S&P 500 vacillated within 49 points.

If you were short the market, you would have been pleasantly surprised to see the opening 2% drop for the major market ETFs, only to be dumbfounded by an astonishing reversal during the last hour, which would have you question the wisdom of your choice to be short the market.

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Stumbling Into October—Major Market ETFs Retreat Sharply

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[Chart courtesy of MarketWatch.com]

The major market ETFs took it on the chin today in what appears to be a continuation of last week’s selloff. The S&P 500 ended up closing below its trading band that I discussed last Tuesday. I featured the S&P 500 chart below, which now clearly shows the downside breakout:

Today’s weakness pushed stocks to their lowest closing levels in a year with the culprits being the usual suspects. The situation in Greece is getting more worrisome by the day, while recession fears in the U.S. continue to linger, although I happen to believe that we’re already in it.

At the same time, worries persist as to the fallout when not if Greece defaults. How many banks are overleveraged with foreign debt so that the slightest haircut will send them into receivership?

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