Major Market ETFs Head Lower, But Damage Is Limited

Ulli Market Commentary Contact

At the open, the markets looked downright ugly as the Dow was briefly down some 300 points before a slow rebound cut into the early losses.

Financial stability in Europe, or the lack thereof, along with a fallout from Friday’s poor unemployment numbers combined to support the bearish case for the moment. Yesterday’s pounding of the European markets caused by worries about a possible Greek default, which might threaten the solvency of a number of European banks, set the tone for today’s opening.

Well, if you missed it, Greek 1-year bonds are generating a yield of over 80%. Does anyone really think they won’t default?

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Precious Metal ETFs Remain The Leaders; ETF Master Cutline List – Updated through 9/2/2011

Ulli ETFs on the Cutline Contact

Another volatile week did little to change the ETF Master Cutline list, as now 47 ETFs hover above the line, while 349 remain below it and in bear market territory.

The leaders are similar to last week in that Precious Metal ETFs still take top billing followed by bond ETFs of all different durations. No surprise there, as last Friday’s sell off pushed the 10-year bond rate below the 2% level for the first time.

Continuously lower interest rates are a sign that all is not well in economic wonderland, and we will most likely have to face some kind of fallout from the poor jobs report after the holiday weekend.

Take a look the latest report:

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Last Week In Review: ETF News And Blog Posts To 9/4/2011

Ulli 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 9/4/2011.

Despite the almost unchanged position of the S&P 500 after the past week, we ended the week on a sour note as a result of the horrific jobs report.

This goes along with my view that these wide market swings are far from being over, with more fallout from the jobs report likely to come. Additionally, the European debt crisis could worsen rapidly and affect the U.S. markets as well.

In any event, if you followed my sell stops rules, you should not have any equity exposure at this time with the possible exception of a couple of sector/country ETFs, or hedged positions.

This week, we covered the following:

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ETF Volatility Likely To Continue In September

Ulli Market Review Contact

After the month of August unleashed bearish forces and gave investors wild rides on both sides of the unchanged line, we are now facing September, which historically has been the worst performing month for the equity markets.

MarketWatch had some thoughts on what’s coming up in “Looking at a scary September:”

This September is likely to be particularly volatile as Federal Reserve Chairman Ben Bernanke deferred any new simulative action until the now two-day Fed meeting on Sept. 20 and 21.

Also, International Monetary Fund leader Christine Lagarde said the global economy was in a dangerous phase while Kansas City Fed President Thomas Hoenig, said last week that the Fed, “can’t do it all,” adding further to the uncertainty facing us as we leave the dog days of summer behind.

Beyond the gloom from the Tetons, a continuing stream of economic reports indicates that the economy continues to slow towards “stall speed.” Manufacturing has dropped to contraction levels and the revision to second-quarter GDP to 1% brought the economy perilously close to negative growth.

Seasonality also points to a rocky ride ahead as Septembers are historically the worst performing month for the stock market. Since 1928, September has recorded more down months than any other month and also holds the record for the worst monthly drop in history which came in September, 1931, when the Dow lost -30%. Septembers can be an “up” month, but the percentage of positive Septembers is the lowest of any month on the calendar.

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ETF Leaders And Laggards – For The Week Ending 9/2/2011

Ulli ETF Leaders & Laggards Contact

Here is a quick ETF review of the past week’s winners and losers from my High Volume ETF Master list:

While the past week produced increased volatility, the S&P 500 closed barely changed from the prior Friday.

Nevertheless, the sharp rebound during the first two trading days had an effect on the Leaders and Laggards listings, as some of our old favorites were replaced by several country ETFs that took top billing—at least for this moment in time.

BRF, EWZ, EZA and ECH were some of the leaders this week; however, their negative M-Index figures clearly indicate that more upside momentum is needed to make sure that this move was not just temporary.

On the Laggards side, things look weak as well, as the M-Indexes are deeply entrenched in bearish territory.

As I have posted repeatedly, given the current state of affairs, being on the sidelines or in hedged positions is the most sensible investment approach, until the major trends and more positive momentum figures point to a different and improved environment.

Disclosure: No Holdings in ETFs discussed

09-02-2011

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, September 2, 2011

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2011/09/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-9012011/

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Market Commentary

Friday, September 2, 2011

LOUSY JOBS REPORTS CLOBBERS MAJOR ETF INDEXES

While the change from last Friday’s close was only minor, it does not tell the entire story. A sharp rebound early in the week was completely wiped out as selling ahead of Friday’s jobs report indicated nervousness.

Rightfully so, as the shocking jobs report came out indicating that there was zero growth in August, while the unemployment rate remained at 9.1%. The major indexes dropped like a rock at the opening and never recovered.

Gold rallied over 3% on the day, while interest rates dropped, and our core holding PRPFX bucked the trend by gaining +0.22%. It was a good day to be hedged, as the short component SH gained +2.59% putting our hedge into the positive by +1.15%, as the matrix shows:

This was the kind of day where both, the long and the short positions gained, which I expected in this current environment. For comparison, our ETF equivalent of PRPFX did even better by gaining around +0.95%. As I have said before, the ETF equivalent usually holds up better in down markets, but at times lags during up markets.

Our Trend Tracking Indexes (TTIs) meandered with the markets and are hovering above and below their respective trend lines as follows:

Domestic TTI: +1.35% (last week +0.69%)
International TTI: -9.42% (last week -10.03%)

The international TTI remains stuck in bear territory, while the domestic version is still hanging tough above the line. Again, I like to see more upside momentum, before I will surrender and call a new domestic ‘Buy’ signal.

Not helping the horrific jobs report were new worries about the European debt crisis as Greece admitted that it is not hitting its spending and economic goals, which may mean that the rest of the EU may not throw any more good money after bad.

None of the major issues that ail the global economies have gone away, although by the sharp rebound during the past week of August, you might have thought differently. My view remains the same in that I believe that there is more downside risk than upside potential.

The events of today may put the Fed back on the spot as Wall Street is sure to howl for another assist. However, right now, there is a long weekend ahead of us before Wall Street returns fully staffed on Tuesday.

It remains to be seen, if there is more of a spillover effect, but chances are that increased volatility will be again on the menu next week.

Have a great Labor Day weekend.

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 Kent:

Q: Ulli: In reviewing the 8/30/11 update on portfolios, I noticed the open position of SH is down almost 8%.  I’m wondering if in your view, this qualifies it as a “sell,” under the 7% stop rule. Thanks, when you get a minute.

A: Kent: The hedge is there for a reason, which is to cover downside risk by being neutral while providing us with potential profit opportunities when the markets correct, such as today. Consequently, I don’t use 7% on the short side, but work mostly with the direction of my Domestic TTI.

Right now, we’re stuck in the middle, although today was a perfect day for the short position, and I will remove SH next Tue/Wed, after the Labor Day, when the effects of today’s jobs reports have been absorbed—assuming that the markets hold up.

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