The Long-Term Outlook Still Looks Questionable for Equity ETFs

Ulli Market Review Contact

[Chart courtesy of MarketWatch.com]

In what has so far been a topsy-turvy week on Wall Street, the markets backtracked into the red after Tuesday’s gains. While the Dow was marginally affected, dropping 0.63%, the S&P 500 and NASDAQ respectively fell 1.26% and 2.01%. It’s quite a disparity among the three major indices indeed. Meanwhile, oil dipped 2.60% to 86.04/barrel.

With regards to the U.S. economic outlook, the recent Beige Book report from the Fed highlighted some improvement in consumer spending as well as manufacturing. However, lower business investment, as shown by lower loan activity, as well as persistent high unemployment, continue to be a crutch for the economy, a sentiment expressed by falling markets today.

Weak economic data and mixed corporate earnings show few signs of improvement in the U.S. Yet, the extent of Europe’s progress with the debt crisis still remains an unanswered question as well.

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7 ETF Model Portfolios You Can Use – Updated through 10/18/2011

Ulli Model ETF Portfolios Contact

Riding the hopes of a European debt solution pushed the major market ETFs to the upper end of the trading range. While domestic equity ETFs still remain on the bearish side of the trend line, some sector ETFs have crossed to the upside and are offering opportunities for gaining limited exposure.

Yesterday, I took advantage of early weakness to add XLP to clients’ portfolios as well as to some of our ETF Models. There are a couple other possibilities I have my eye on. Another strong push may very well be the one that confirms an upside breakout and brings domestic equities into play again.

Take a look at the latest numbers:

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This Market Turbulence is Mind Boggling for ETFs

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[Chart courtesy of MarketWatch.com]

Just when it seemed like markets came to reality and began taking Europe’s problems into account again, equities shot up, with the S&P 500 rising 2.04% while volatility subsided.  The amount of sensitivity to news in the marketplace is borderline insane at the moment. I simply can’t deviate from our strategy yet, unless a viable long-term trend develops; at least for equity ETFs.

The big news of the day was an announcement from France and Germany that the EFSF would be roughly quadrupled to $2 trillion. Yet, the spread between the French 10-year bond and the German bund hit its highest since 1992 at 114 basis points. The expansion is a crucial step to address Eurozone debt, but does it mean we have a long-term solution?

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Market Risk is Back On For Equity ETFs – Are We Heading Down Again?

Ulli Market Review Contact

[Chart courtesy of MarketWatch.com]

Finally coming to grips with the underlying issues plaguing Europe, markets went into reverse after two weeks of gains, with the S&P dropping 1.94%. Most notably, the VIX skyrocketed 18.24%, indicating that worries concerning a European debt solution have substantially put risk back on the table.

Furthermore, the dollar appreciated against the Euro, finishing at $1.37/Euro, while the 10-year Treasury dipped to 2.16%. Oil and gold had modest losses just north of 0.5%

Just when it seemed like the market was turning a corner with a brief rally, potentially prompting some limited equity exposure, the gloom and doom reality of Europe entered the investment sphere once again. Let’s just say the numbers aren’t looking too rosy.

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Sector ETFs: Is There Upward Momentum? ETF Master Cutline Report Provides Some Answers

Ulli ETF News Contact

I have made no secret out of the fact that I remain somewhat skeptical about the current market run-up; however, some of the positive trends as of late have necessitated looking at some sector ETFs.

I’m still sticking to a general strategy of bond ETFs/cash, but if trends continue to point higher, and more trend lines are crossed to the upside, there might be some equity additions to our overall portfolio.

Although there is still a lack of clear direction of where the global economy is heading, and how that will impact markets, I want to highlight some possible ETF opportunities if the overall picture brightens up.

Focusing on sector ETFs, it’s a bit of a mixed bag. It’s best to steer clear of the battered financial sector, especially in the wake of dismal earnings from Wall Street, as seen by the performance of the Financial Sector SPDR ETF (XLF), which is now down 21.0% for the year.

Not to mention, the basic materials and energy sectors have been hit hard as of late given reduced Chinese demand among other factors. In essence, there’s a lot of volatility here. While our momentum numbers support that view, there are some possible gems.

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Last Week In Review: ETF News And Blog Posts To 10/16/2011

Ulli Market Review 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 10/16/2011.

Up, up and away was the mantra for the past week, as the markets focused on a positive outcome of the European debt deal allegedly being worked out by France and Germany. Some announcement to the effect will be due out next weekend. It better have some shock-and-awe effect, since that is exactly what the markets expect.

If the solution proves to be “underwhelming,” we could see the major market ETFs head back south. For right now, a wait and see attitude, along with high hopes, prevails.

If you followed my sell stops rules, you should no longer have any equity exposure at this time with the possible exception of a couple of sector/country/bond ETFs, or hedged positions.

This week, we covered the following:

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