New ETFs On The Block: WisdomTree International Hedged Equity ETF (HDWM)

Ulli International ETFs Contact

91551519The theme of hedging currency risk within the same wrapper of an international equity portfolio has gained popularity in the US, particularly after the greenback’s continued strength amid diverging monetary policies across the Atlantic.

WisdomTree, the fifth-largest US issuer of exchange traded funds, has been fairly successful in gauging investors’ preference as evidenced from their wildly successful WisdomTree Japan Hedged Equity Fund (DXJ) and WisdomTree Europe Hedged Equity Fund (HEDJ). Both the funds have managed to garner about $37 billion in total assets in the past 18 months amid the turmoil in Europe and Asia.

WisdomTree expanded their currency hedged wrapper recently with the launch of another product that has a diversified exposure to the world’s developed and developing countries ex-Canada and the US.

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ETF/No Load Fund Tracker Newsletter For August 28, 2015

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ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2015/08/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-08272015/

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Market Commentary

CLOSING WITH A WHIMPER AFTER A TUMULTUOUS WEEK

Fri pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

One look at the chart tells the entire story. It was a wild and tumultuous week that ended up on the plus side but could have just as easily gone the other way with the S&P 500 touching the 1,867 level. As posted, both of our main directional indicators, the Trend Tracking Indexes (TTIs), slipped below their long-term trend lines and remain in bearish territory despite the enormous 2-day rebound we saw on Wednesday and Thursday.

For the time being, this rebound has the look and feel of what we saw last October, when the markets capitulated for only 8 days, before the bulls gained the upper hand and upward momentum resumed. It’s too early to tell if we will get lucky again or if this time will be different. Our goal, when using the Trend Tracking approach, is to sidestep an oncoming bear market in order to avoid severe portfolio destruction.

At times, as we’ve seen in October 2014, it will turn out to be a false alarm, and we will need to re-establish our equity positions once the trend turns bullish again. Nobody knows for sure what’s next, but I think we will find out pretty soon if this week’s sudden rebound was a resumption of the previous trend or nothing but a giant head fake.

6 of our 10 ETFs in the Spotlight edged up slightly during this see-saw day. Leading the winners was the Select Dividend ETF (DVY) with +0.38%, while, on the losing side, Healthcare (XLV) took the dubious honors with a loss of -0.57%.

Our Trend Tracking Indexes (TTIs) remain in bear market territory as section 3 below shows.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 08/27/2015

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ETF/Mutual Fund Data updated through Thursday, August 27, 2015

TOC 082715

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

 

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: SELL — since 8/24/2015

TTI

Our main directional indicator, the Domestic Trend Tracking Index (TTI), broke through its long-term trend line generating a “Sell” for this arena effective 10/14/2014, which was followed by a violent break back above the line on 10/22/14 generating a new “Buy.” It was a classic whipsaw signal, and you can read more on my blog as to the events as they were unfolding.

As of today, our TTI (green line in above chart) is positioned below its long term trend line (red) by -1.46% after having generated a “Sell” signal as of 8/24/2015, which applies to all “broadly diversified domestic equity ETFs/Mutual Funds.”

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Indexes Continue Rising Despite China Concerns

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks surged again as Wall Street built on the Dow’s historic rally Wednesday. Order is now allegedly restored in the U.S. stock market following its first dip into correction territory in four years. Investor angst is on the decline and stock prices were again on the rise following the Dow’s nearly 620-point, 4% gain Wednesday, a much-needed and hoped for rebound that restored a sense of stability to a nervous market following a nearly 15% drop for the blue-chip stock gauge from its May 19 high.

Pushing the rally forward were fresh signs that the U.S. economy is still powering on despite slowing growth in China, including a strong revised reading released today on second-quarter GDP, which came in at 3.7%, up from an initial estimate of 2.3%, and comments from a Federal Reserve member Wednesday that pointed out that the reasons for a September interest-rate hike were “less compelling” following the recent market turbulence caused by China’s growth scare. I mentioned earlier in the week that chances were good that a Fed member might jawbone the markets higher similar to October last year; and they did not disappoint.

While this rebound has a a little ways to go before we can declare this bearish period to be in the rear view mirror, odds are high that volatility is still with us and bearish forces could take over again quickly. We’ll have to wait and see how things play out until we have clear evidence that the bull is still alive and kicking before making new commitments to the market.

For the second day in a row, all of our 10 ETFs in the Spotlight participated in the rebound and closed higher. The leader of the day was the Mid-Cap Value ETF (IWS) with +2.95%; lagging the bunch was Consumer Staples (XLP) with a more modest gain of +1.38%.

Despite two days of sharp rallies, our TTIs remain on the bearish side of their trend lines as you can see in section 3 below.

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A Rebound With Legs Or Another Dead Cat Bounce?

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The Dow rebounded big time today, surging nearly 620 points, which is its third-best daily point gain ever and best since 2008. This finally ended a painful six-day losing streak and gave Wall Street the signs of stabilization it has been craving after its worst rout in four years.

Giving the markets a boost early Wednesday was a strong reading on durable goods orders in July, orders for large-ticket items like dishwashers and washing machines. The 2% rise helped boost confidence about the U.S. economy.

While stocks in China ended the volatile trading session lower, the losses were not as dramatic as seen in recent days—only about -1%. Chinese officials took steps to shore up its economy and markets Tuesday by cutting interest rates and taking steps to make it easier for banks to lend money to borrowers.

The big question now remains as to whether this was just another dead cat bounce or a rebound with legs. Of course, nobody has that answer, and it’s way to early to make any assessment of the market, since we just went bearish last Friday. Fast and furious moves are rarely a sign of directional strength; they merely confirm uncertainty and nothing else.

We need to see a slow and steady up-move, maybe some sideways meandering followed by a break of our TTIs to the upside. Then we have something tangible we can work with. Until that break occurs, I consider all moves, up and down, simply part of bear market turmoil.

All of our 10 ETFs in the Spotlight showed some green numbers for a change with all sectors participating in the rebound. The leader was the Low Volatility ETF (SPLV) with +4.87%. Lagging a bit was the Select Dividend ETF (DVY) with +2.17%. See section 3 below for the effect on our Trend Tracking Indexes.

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Bounceback Tuesday Turns into Vicious Sell-off—China Dumps Again

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

This morning, China’s Shanghai index took another cliff dive at the tune of some 7.6%, but the European and U.S. markets simply ignored it as they were busy celebrating the Tuesday bounce-back, which took the Dow up by some 440 points.

Unfortunately, the euphoric feeling did not last, and the major indexes participated in a last hour selling frenzy that wiped out all morning gains and pulled stocks deeper into bear market territory making this a classic dead cat bounce. Apparently, China did matter.

Over the past 30 years, I have observed that large point gains in the indexes rarely occur in bull markets but are predominantly a sharp reflex response once our domestic TTI has moved into bear market territory. In fact, six of the largest point gains occurred between September 2008 and March 2009. You can read about it here.

At this time I expect continued volatility with large drops being followed by sharp rebounds with bias being to the downside. I hope you took the opportunity this morning to bail out of any equity holdings you had left. Remember, markets tend to go down a lot faster than they go up.

All of our 10 ETFs in the Spotlight headed south again, as the hope rally ran out of steam. Leading the downside was the Select Dividend ETF (DVY) with a loss of -1.84%. Resisting the sell-off best was the Consumer Discretionaries ETF (XLY), which gave back -0.43%.

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