My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

In a repeat of last week, the major indexes closed slightly lower.

Our Trend Tracking Index (TTI) for domestic funds/ETFs has now crossed its trend line (red) to the upside by +2.46% keeping the current buy signal intact. The effective date was June 3, 2009.



The international index has now broken above its long-term trend line by +9.22%. A Buy signal was triggered effective May 11, 2009. We are holding our positions subject to a trailing stop loss.

The Fed left key short-term interest rates alone as expected and hinted that the economy, while stabilizing, does not require any rate hikes in the near futures.

While that should have been good news, Wall Street reacted somewhat negative, and the major indexes surrendered their early gains, as the above chart shows. Meeting anticipation apparently wasn’t a good thing.

Right now, we’re still stuck in a trading range, which encompasses about 880 to 910 on the S&P; 500. As I said yesterday, be prepared that a breakout will occur; that is a sure thing. What is unknown is when it will occur and whether it will be bullish or bearish.

This lack of direction is reflected in our Trend Tracking Indexes (TTIs) as well, which have not moved much at all. Here’s the latest update:

Domestic TTI: +0.58%
International TTI: +7.61%
Hedge TTI: -0.49%

We’re holding all positions subject to our trailing stop loss points.

As the Trend Tracking Indexes (TTIs) are hovering tightly above or below their long-term trend lines, I tend to spend a little bit more time updating the important numbers you need to know on a day-to-day basis.

These are critical times in terms of making decisions and, once a clear trend (either up or down) has been established again, I will focus again on other issues.

Yesterday, the markets retreated first and then traded the day in a sideways pattern, essentially closing unchanged. What that tells me is that there is great uncertainty, and we could very well be at a major inflection point. That simple means that right now upward and downward momentum are fairly balanced, which is why we haven’t seen any clarity in direction.

While this pattern may continue for a while, sooner or later a break out will occur. That could be either in form of a renewed downward slide back into bear market territory or as a breakout, which could carry the major indexes to higher levels.

I have no clue which way it will play out but, as I have repeatedly said, I prefer to err on the side of caution. To me, that means enforcing my sell stops even if I have to hunter later on for a new entry point should the markets head back north.

The old saying that “I’d rather live with lost opportunity than with lost money” is something that many investors should take to heart in these uncertain economic times.

The markets started the week out on a sour note yesterday as they have for the past two Monday’s.

Some of our sell stops in the international arena were triggered and, barring a major rally today, the affected positions will be liquidated.

It was a bit of good news/bad news scenario. The good news was that the sell off happened on light volume (again), but the bad news was that we closed at the lows for the day as the above chart clearly indicates. This means that further weakness is likely.

A forecast from the World Bank that the global economy will contract by 2.9% this year vs. an earlier forecast of a more moderate 1.7% proved to be more than the markets could handle and south we went.

Our Trend Tracking Indexes (TTIs) slipped as well and are showing now the following positions:

Domestic TTI: +0.12%
International TTI: +6.60%
Hedge TTI: -0.94%

This means that we are within striking distance of a domestic sell signal. Before pulling the trigger, I want to make sure that the TTI clearly pierces the trend line to the downside. I will keep you informed via this blog, so stay tuned to any changes.

Today marks the one year anniversary of our last domestic Sell signal, which was effective 6/23/2008. Those who followed it were richly rewarded; those who didn’t suffered steep portfolio losses. One year later, the S&P; 500 is still down over 32% from the point of our sell signal and many portfolios are worse off.

At this very moment, it seems to me that the government induced stimulus rally has run out of steam, and we will need to wait to see if there are some positive news on the horizon that can pump some life into the fading indexes.

I won’t hold my breath, but I believe that a defensive posture, such as I advocate via our hedged positions, is in order—at least for the time being. If things get worse, we will be heading for the sidelines.

Again, my mode of operation is (and always has been) that I’d be rather safe than sorry. I suggest you do the same, if you handle your own portfolio.

The investment world is scrambling to come up with new and improved products to ascertain the public does not lose confidence. I posted about actively managed ETFs and “new funds for the fearful” over the past couple of days.

Now Long/Short fund providers started to chime in by promoting the features of their products. I received one such mailing from Palantir Funds with the following comment:

In these turbulent times, it may be vital for you to have awareness and access to alternative investment strategies designed to work well through all market cycles. The Palantir Fund (PALIX) is such a vehicle. Regardless of market direction, the goal of the Palantir Fund is to make money every year. Using a Global All Cap Long/Short investment strategy, this no-load mutual fund is designed for use as a core holding in a well invested portfolio.

• Zacks Investment Research ranks the Palantir Fund “1 for Strong Buy”

I don’t think much of ranking agencies and much prefer to a look at a chart. Here’s a graph of PALIX plotted against the S&P; 500 as comparison:

This fund has only been around for about 1-1/2 years. What becomes very clear is that PALIX tracks the S&P; 500 pretty closely. While it did not drop as sharply during the 2008 market massacre, it nevertheless did not avoid the sell off.

If you are of the opinion that Long/Short funds are the savior during bear markets, you’d be dead wrong. As last year has shown, PALIX reduced portfolio damage somewhat, but not enough to make me comfortable owning this fund when the next down leg occurs, whenever that will be.

Portfolio damage in bear markets can only be controlled by being out of equities and on the sidelines (or possibly in bond funds) via a clearly defined entry and exit strategy. Long/Short funds have been around a long time, but they don’t seem to address that issue to make them a valid investment choice.

MarketWatch featured an interesting article titled “ETFs may give mutual funds a run for the money.” Let’s listen in:

We’ll soon find out if exchange-traded funds can live up to the hype and “replace” the traditional mutual fund.

So the next phase in the ETF revolution will be an explosion of active funds, but an investor who prefers managed funds shouldn’t join the revolution until they believe that an active ETF is superior to the traditional funds they hold.

I am all for alternative investment solutions, especially if they offer the individual investor freedom of choice. To me, that simply means getting them away from the world of ridiculous short-term redemption fees and minimum holding periods so common in the mutual fund industry.

If the competition between ETFs and mutual funds heats up, everyone will be better of with improved product choices and less restrictions. Eventually, mutual fund providers need to come off their high horse if they are to remain in business and compete successfully with ETFs.

Having said that, I also need to caution you that just because an ETF is actively managed, it will do no more for you than an actively managed mutual fund if you continue to follow the loser’s approach to investing by simply buying and holding.

2001/02 and 2008 have proven that it does not matter what investment you are involved with, or which fancy asset allocation model you were sold, they all went down with the bear market.

Actively managed ETFs are just like mutual funds in that it is still up to you to make appropriate investments decisions (or hire someone who will do it for you) as to when to be in the market and when not.

If you think that actively managed ETFs can take that responsibility from you, you will be sadly mistaken when the bear rears its ugly head again.