Mutual Funds On The Cutline – Updated as of 6/6/2011

Ulli Mutual Funds On The Cutline Contact

With the sell off continuing, the cutline suddenly became very crowded by equity mutual funds, which dropped in from a level above the highest +20 reading.

As a regular reader, you know that lately most of the funds, hovering slightly above and below their long-term trend line, were bond funds. That’s changed dramatically this week, as further market weakness pulled equities off their lofty levels.

From last week’s report, only Scudder International (SUIAX) remained on the list, but it retreated from +19 to its current -8 position.

The momentum numbers worsened considerably, including the all important DrawDown figures in the DD% column. If this pullback turns out to be temporary in nature, which is far from being certain, any moves back above the cutline will offer new potential buying opportunities, provided most negative numbers turn into positive ones.

However, right all major indexes are slipping, so be sure to look at the latest update for our Trend Tracking Indexes (TTIs), at the end of this week’s cutline report:

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The Biggest Losing ETF Has Finally Made A Bottom

Ulli ETF News Contact

On several occasions, I have posted about the United States Natural Gas Fund (UNG) as having been the biggest losing ETF of the past few years.

It recently broke its long-term trend line to the upside by +3.48%, while its momentum numbers have improved and are showing the following results:

4-wk: +8.45%

8-wk: +12.76%

12-wk: +14.71%

YTD: -0.42%

Performance for current Buy cycle from 6/3/09: -58.29%

DD% (DrawDown): -62.44%

The 5-year chart above, courtesy of YahooFinance, confirms the turnaround. Is this finally the time to buy UNG?

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ETFs On The Cutline – Updated through 6/3/2011

Ulli ETFs on the Cutline Contact

With the market bulls getting the sledgehammer treatment last week, there obviously was more weakness than strength in the most current ETF Cutline report.

As I mentioned before, when domestic markets succumb to bearish forces, at times selected county ETFs buck the trend and move higher, or at least hold their ground. That was the case last week as the Hong Kong index (EWH) rallied from a +11 position above the trend line to +16, while Emerging Latin America (GML) stayed pretty firm by slipping only from +13 to +10.

Dropping in from a level above +20 was the S&P China index (GXC), which settled at +15.

Weakness was apparent with ILF (Latin America), which sank from +7 to -12. A lesser drop happened to EEB (Diversified Emerging Markets), which slipped from -7 to -13.

Again, it’s important for me to point out that, as I posted in “How do I use the ETF Cutline Table to make a Buy decision,” just because an ETF rallies above its trend line, does not mean it’s a buy. If you missed it, take a look at the link for details on what to look for before making a decision.

Here’s this week’s report:

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Last Week’s Lessons: ETF News And Blog Posts

Ulli ETF News Contact

In case you missed it, here’s a summary of the topics that I posted to my blog during week ending on 6/3/2011.

The markets took a beating with the major indexes ending up closing the week at their lows, which could signal more weakness ahead.

My published Cutline tables and Model ETF Portfolios can give you an assist by indentifying weakness and strength in various market segments so that you can make better investment decisions by avoiding exposure in those areas that are trending down.

This week, we covered the following:

“ETFs Are Moving Into The 401k Arena”

“ETF Leaders And Laggards – For The Week Ending 6/3/2011”

“Reader Q & A: Which ETF Model Portfolio Is Right For Me?”

“ETF/No Load Fund Tracker For Friday, June 3, 2011”

“Weekly StatSheet For The ETF/No Load Fund Tracker – Updated Through 6/2/2011”

“High Volume ETFs On The Cutline – Updated Through 6/1/2011”

“6 ETF Model Portfolios You Can Use – Updated through 5/31/2011”

“Mutual Funds On The Cutline – Updated as of 5/27/2011”

“New Russell 2000 High Beta ETF (SHBT) Started Trading”

“ETFs On The Cutline – Updated through 5/27/2011”

ETFs Are Moving Into The 401k Arena

Ulli 401k ETFs Contact

The WSJ (subscription required) reports in “Schwab’s Bold Bet on ETFs” that the brokerage firm soon would offer 401(k) retirement plans solely stuffed with ETFs—and let investors trade them without charge:

ETFs, which typically carry low fees and trade like stocks on exchanges, have exploded in popularity, a rare source of growth in the otherwise stagnant mutual-fund industry. ETFs now hold a total of $997 billion in assets, up from $65.6 billion a decade ago. Still, ETFs have yet to make a dent in employer-sponsored 401(k) accounts, a $2.8 trillion market.

Schwab, just a bit player in 401(k)s now, sees ETFs as a way to edge closer to giants such as Fidelity Investments, Aon Corp.’s Aon Hewitt and Vanguard Group. According to consulting firm Cerulli Associates, those three had a combined market share of about 43% in 2009, the latest year for which data are available.

Schwab doesn’t disclose publicly how much of its $4.2 billion in annual revenue comes from the 401(k) business. Cerulli ranks the San Francisco company 10th by assets, at $72.5 billion.

Many 401(k)s, particularly those offered by Vanguard, already offer a thick menu of low-cost index mutual funds. So Schwab’s main targets are companies where 401(k) plans consist largely of actively managed mutual funds. Such funds charge higher fees than index funds or ETFs.

Adding ETFs to 401(k) plans could put more pressure on actively managed fees, a trend that began with the introduction of index funds in the 1970s.

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ETF Leaders And Laggards – For The Week Ending 6/3/2011

Ulli ETF Leaders & Laggards Contact

Here are this past week’s top 5 winners and losers from my High Volume ETF Master List:

With the domestic markets having sold off sharply, some of the country ETFs bucked the trend and headed higher. To a lesser degree this is also reflected in the broadly based VWO, which gained +0.48% as opposed to the SPY’s loss of -2.31%.

The weak economic news pressured especially retail and transportation ETFs.

Disclosure: Holdings in VWO