I had some email exchanges with reader Bob, who responded with the ultimate question. Here’s what he had to say:
I am using a 7% trailing stop for all ETF’s. So far, none have hit the execution point. The one issue I am struggling with is when to take a profit.
For example, I have MDY up 25% and IVV up 10%. Usually, I wait too long, and the ETF heads south before I realize it. The trailing stop will take care of a market reversal.
How much profit is enough without being greedy?
ETF/No Load Fund Tracker StatSheet
————————————————————-
THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:
————————————————————
Market Commentary
Friday, May 6, 2011
WHACKING THE BULLS
After last week’s strong rally, it was time for the bears to show some muscle and pull the major indexes back into reality territory. After 4 days of selling, euphoria about today’s better than expected jobs report pulled the market out of the doldrums via a sharp opening upside spike.
I am not sure if this was a partial dead cat bounce, but sentiment
ETF/Mutual Fund Data updated through Thursday, May 5, 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 6/3/2009
As announced via a blog post, on 6/2/2009, the TTI triggered a buy signal with an effective date of 6/3/2009. We will use the 7% trailing stop loss of our positions as an exit point or the crossing of the trend line to the downside, whichever occurs first.
As of today, our Trend Tracking Index (TTI—green line in above chart) has broken above its long term trend line (red) by +4.85%.
Crude oil took a steep dive today and closed below the $100 level for the first time since the middle of March. USO, the ETF equivalent, lost 9.11% for the day.
The entire commodity index followed suit with DBC dropping 6.7%, while gold (GLD) and silver (SLV) gave back 2.88% and 11.89% respectively. The dollar was the beneficiary and gained against the major currencies.
One of the reasons for the recent fall of the metals was that margin requirements had been raised; in some cases by 84% over the past two weeks. With many commodity speculators “investing” on borrowed money, selling the positions was the only viable option.
Here’s the latest update of the High Volume only ETFs, which are hovering slightly below and above their cutline (trend line). 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 90 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.
With the markets being in correction mode over the past 2 trading days, there were some surprise moves to the downside and the upside. The more volatile BRF sold off sharply and dropped from a +16 position to -2, ending up below its long term trend line. ILF followed closely but remained at +1, which represents the first ETF above the line.
On the positive side, there was one ETF, which bucked the sell off and actually climbed up the food chain from +2 to +7. For new money, this is the only buy on this week’s list.
That is the question, especially after silver got hammered pretty hard over the past few trading days. The simple answer is that it depends on who you ask.
For some thoughts, let’s listen in to the WSJ’s “Steep Drop Tarnishes Bog Bets On Silver” (subscription required):
Silver prices plunged, suffering their worst one-day drop in dollar terms in three decades, as investors fretted that rising trading costs could cripple a market exhibiting signs of froth.
Silver’s fall of $3.50, or 7.6%, and a 1% drop in gold prices Tuesday came as some major investors have been selling. George Soros’s big hedge fund, a firm operated by high-profile investor John Burbank and some other leading firms have been selling gold and silver, according to people close to the matter, after furiously accumulating precious metals for much of the past two years.
Their selling suggested the sharp, nine-month run-up for precious metals could be entering more dangerous territory.