Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 11/10/2011

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ETF/Mutual Fund Data updated through Thursday, November 10, 2011

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

 

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY — since 10/25/2011

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. The clear break to the upside occurred on 10/24/11 and, effective 10/25/11, a new Buy signal for domestic equities is in effect.

As of today, our Trend Tracking Index (TTI—green line in above chart) has broken back above its long term trend line (red) by +2.33%.

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Investors See Some Light Today, Yet Equity ETFs Are Still Entrenched In Darkness

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[Chart courtesy of MarketWatch.com]

After yesterday’s big losses, markets edged up a little bit today although the overall story in Europe hasn’t changed in a day’s passing. The S&P 500 gained a modest 0.86% while the 10-year Treasury rate shot right back up to end at 2.06%. The dollar/Euro exchange rate barely changed, rising slightly to $1.36/Euro.

Luckily, risk tempered as the VIX fell 9.26% in the wake of yesterday’s massive surge. Nevertheless, we are still in risky territory and equity ETF opportunities are starting to become few and far between once again, despite our Domestic Trend Tracking Index (TTI) remaining in bullish territory by +2.35%.

Italian optimism crept back into markets today because of lower yields in Italy’s bond sale, although it’s likely that the ECB heavily intervened to keep borrowing costs from getting out of control. Nouriel Roubini’s latest piece drives home the point that Italy’s spiraling debt is a force to be reckoned with that can bring down Europe.

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Is This the Start Of Another Downward Spiral For ETFs?

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[Chart courtesy of MarketWatch.com]

It looks like the deep rooted problems of the Eurozone finally registered with investors as markets tanked after two consecutive days of seemingly unjustified exuberance. The S&P 500 took a 3.67% dive, while major European indices also took a sizeable hit. Nevertheless, Asia somehow finished on the positive side.

The dollar noticeably strengthened against the Euro as Italy’s situation has quickly worsened, appreciating 3 cents to $1.35/Euro. And as an indicator of heightened Eurozone risk triggering a temporary flight to safety, the U.S. 10-year Treasury dropped to yield 1.96%.

However, the most eye popping figure that grabbed my attention was the Volatility Index (VIX), which catapulted 31.59% to 36.16. This was the largest increase since August 8 when the VIX had a 50% pop. As I mentioned yesterday about how quickly we can switch from risk on to risk off and vice versa, we are certainly back into risk on mode as Italy’s debt problems come to the forefront.

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7 ETF Model Portfolios You Can Use – Updated through 11/8/2011

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The markets remained in rally mode, since last week’s report, on the basis that politicians will actually be able to find a solution to solve Europe’s ever growing debt problems.

All of our ETF model portfolios inched higher, but to a lesser degree than the S&P 500, due to a less than 100% invested position, which has smoothed out the ride.

However, on a YTD basis, most of them are still ahead of the benchmark index. Take a look at the latest update:

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ETFs on the Upside – How Long Will Irrationality Last?

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[Chart courtesy of MarketWatch.com]

Europe is going through turbulent times, but markets didn’t seem to care as the S&P 500 rose 1.17%.  Other indices such as the FTSE and DAX also ended in the green. However, these weekly up and down swings are disconcerting as markets quickly transition between risk on and risk off modes.

Confirming my concerns, Italy is now stuck in a very tight spot politically. Berlusconi failed to reach a majority in yesterday’s budget vote, heeding calls for him to step down in order to prevent a potential market panic. The plan is for him to bid his “Arrivederci” once an austerity budget is passed.

An indication of escalating borrowing costs, Italy’s 10-year bond hit a high of 6.77%, highlighting a real risk that Italy won’t be able to pay off its debt. As a larger economic force, a financial meltdown in Italy could trigger greater widespread contagion throughout Europe. Whether Italy has the political will to muster a turnaround remains to be seen, despite the perceived optimistic investor sentiment seen today.

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Political Chaos in Europe Is No Good for Equity ETFs, Despite Today’s Sentiment

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[Chart courtesy of MarketWatch.com]

Despite the European turmoil at the political level, markets responded positively as the S&P 500 gained 0.63%.

The dollar remained relatively unchanged versus the Euro, staying at $1.38/Euro. Oddly enough, the Volatility Index was relatively flat, dropping 1.03%. While markets might be saying that Europe might be working to solve its solution, I still believe the worst is far from over. Equity ETFS are destined for a big shakeup sometime soon, unless a credible debt solution is planned and implemented.

Whereas much of the focus as of late has centered on how the Eurozone could create an economically viable bailout and bank recapitalization package, the spotlight now turns to politics.

Though it’s not official yet, Greek PM Papandreou is planning to step down, making the way for a new coalition government. While some might argue that a new coalition government might benefit Greece, the uncertainty surrounding how a new government plans on tackling the country’s debt issues is rather unsettling.

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