Ulli... The ETF Bully

ETFs/Mutual Funds On The Cutline – Updated Through 1/13/2012

Ulli Monday, 16 January 2012, 6:07 AM ETFs on the Cutline Contact

Below are the latest ETF Cutline reports, which show how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs/MFs are positioned.

The first report covers the ETF Master List from Thursday’s StatSheet and includes 398 ETFs, of which currently 214 (last week 162) of them are hovering in bullish territory.

The second report includes only High Volume ETFs. To clarify, High Volume (HV) ETFs are defined as those with an average daily volume of $10 million or higher.

These ETFs are generated from my selected list of some 93 that I use in my advisor practice. It cuts out the “noise,” which simply means it eliminates those ETFs that I would never buy because of their volume limitations. 33 ETFs (last week 21) have managed to hang on in bullish territory after the recent volatility.

The third report covers Mutual Funds on the Cutline. There are currently 448 (last week 289) above the line and 413 below it out of the 861 that I follow.

Take a look:

1. ETF Master Cutline Report

2. ETF High Volume Cutline Report

3. MF Cutline Report

Last Week In Review: ETF News And Blog Posts To 1/15/2012

Ulli Sunday, 15 January 2012, 8:00 AM ETF News Contact

In case you missed it, here’s a summary of the ETF topics and market reviews I posted to my blog during the week ending on 1/15/2012.

Continued upward momentum pushed the major indexes higher by less than 1%. With Friday’s downgrade of various European countries, it remains to be seen how the markets will react when Wall Street opens for business on Tuesday.

Since this was really no unexpected news, the main focus may remain on the overall European crisis and hopefully some positive offsetting news from the upcoming earnings season.

This week, we covered the following:

S&P Downgrades Add Further Strain on Europe

Ulli Sunday, 15 January 2012, 6:15 AM Market Commentary Contact

Standard and Poor’s didn’t shy away from issuing en masse downgrades to 9 countries in Europe after months of warnings. In other words, Europe is on thin ice and will have to act fast before its unified economic foundation breaks into fragmented pieces.

In this week’s video, managing director of sovereign ratings at S&P, John Chambers, presents a breakdown of the downgrade decisions as well as what’s at stake for Europe in the near future.

Doubts remain as to whether countries such as Italy, Portugal, and Spain can successfully implement austerity measures and reduce their fiscal deficits while financing their massive debt loads. Given these downgrades where Italy is now non-investment grade while Portugal has hit junk status, attracting investors will be difficult, which should increase borrowing costs.

Meanwhile, the efficacy of the EFSF is still uncertain as to whether it will help the Eurozone. Unfortunately, outside funding via the IMF and others is becoming more of a reality as the contagion worsens.

We’ll just have to see if markets react more negatively on Tuesday especially with talks in Greece breaking down.

Political Affiliation and Investment Returns – Is There A Link?

Ulli Saturday, 14 January 2012, 6:10 AM Market Commentary Contact

With the Republican primary well under way, I’m sure you may be wondering which candidate will be able to revive the U.S. economy and push markets back into bull territory. Over the years, the debate between politics and financial growth has been contentious, questioning whether Democratic or Republican policies are more beneficial for the economy and financial markets.

As we sit at a crossroads wondering whether Obama’s Keynesian approach through fiscal stimulus or a non-interventionist approach á la Reagan from a new president will put the U.S. back on a growth trajectory, will it ultimately have any impact on our investment portfolios?

Perhaps the successes of one administration that result in bull markets are simply the product of the previous administration. Meanwhile, some contend that markets will perform better under Republican presidencies because they are perceived to institute economic policies deemed advantageous to markets.

To get an understanding of some of the theories out there, let’s look at some of the financial literature.

01-13-2012

Ulli Friday, 13 January 2012, 5:03 PM Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, January 13, 2012

ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2012/01/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-01122012/

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Market Commentary

Friday, January 13, 2012

WAKE-UP CALL MOVES EQUITY ETFS DOWNWARDS

Friday the 13^th took on a new meaning as a fear of downgrades with Standard and Poor’s issuing 9 sovereign downgrades in Europe. In what could’ve been a much uglier day, the S&P 500 finished down only 0.49%. Regardless, the Euro remains at $1.27/Euro, signaling overall weakness in the Eurozone.

Luckily, the expectations of a downgrade given the warnings resulted in a lighter blow to markets than what might’ve happened had it been an unexpected event. For instance, the VIX rose just a little more than 2%.

While volatility might be down, investors’ actions suggest otherwise as the 10-year Treasury yield fell down to 1.85%. So while equities aren’t necessarily getting hit very hard, there are significant inflows into less risky government securities such as Treasuries in an attempt to find a safe haven. In other words, we are very much in risk on mode.

After a couple months of warnings, Standard and Poor’s finally downgraded France one notch down from its AAA status, adding further strain on the European core. Hopefully, Germany won’t be next.

The ratings agency also doled a downgrade out to Italy, giving it BBB+ status, classifying Italy as non-investment grade. Portugal and Spain were also downgraded 2 notches, raising serious debt concerns. How the PIIGS will climb out of this deadly debt spiral with what are likely to be higher borrowing costs is beyond my understanding.

In the tug-o-war between Greece and its bondholders over debt restructuring, it looks like bondholders are pulling their weight as talks were postponed today. At this point, Greece’s financial credibility is simply extinguished. It’s time to put up the white flag and opt for orderly default.

In the U.S., exports dropped 0.9% according to the Department of Commerce, widening the trade deficit. Although a stronger dollar helps on the domestic demand side, it’s not good for export-dependent manufacturing, which is already struggling.

With regards to our trend tracking indexes, the fact that the Domestic TTI is at +3.03% continues to warrant some domestic equity ETF exposure. However, we’re still steering clear of international ETFs since the International TTI is at -4.97%.

Although markets didn’t react very sensitively to downgrade news, I find these developments quite worrisome. In what will likely trigger higher borrowing costs due to increased risk perception, I’m not sure how European countries will be able to afford to finance their debt.

We’ll have to see if today’s negative sentiment rolls up into something bigger next week.

Have a great week.

Ulli…

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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 Mel:

Q: Ulli: I’m not sure if my comment last week got through. I appreciate your blog greatly. I know that today you are saying that “for those wishing to make some equity ETF additions, now might be an opportune time.”

I understand that international ETFs are still off the table, but the TTI for domestic equity crossed up over the trend line in October. But as I have followed your blog, you seemed to be saying we shouldn’t follow that signal but stay in cash and bonds. Was that interpretation right? Do you advise domestic equity exposure now? Do you have a rough percentage in mind for equities vs. cash and bonds? Or are you still avoiding the equity market?

Thanks so much for your blog, and in advance for answering my query.

A: Mel: I have always favored bonds and cash along with some selected sector funds. I use the HV ETF Cutline report to make my selections from those ETFs that have crossed their trend lines to the upside. There are more to choose from now than a few months ago. The amount of allocation depends strictly on your risk profile. Have I increased some of my equity holdings? Yes, I have added exposure.

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https://theetfbully.com/personal-investment-management/

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Back issues of the ETF/No Load Fund Tracker are available on the web at:

https://theetfbully.com/newsletter-archives/