SPY Snaps 4-Day Losing Streak

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

The bulk of today’s advance occurred shortly after the open as the Dow, Nasdaq, and S&P 500 notched their highs during the initial 30 minutes. Despite today’s gain, the benchmark index remains lower by 1.1% in December. The energy sector (+1.0%) displayed strength from the open after its largest component, Exxon Mobil (XOM), was upgraded to ‘Buy’ from ‘Neutral’ at Goldman Sachs. Crude oil, which added 0.9% to $97.47/bbl, also played a part in the sector’s strength.

Two major deals caught investors’ attention today: Chipmaker Avago Technologies is buying LSI Corp. for $6.6 billion. And AIG is selling its aircraft leasing business for about $5.4 billion to Dutch leasing company AerCap. AIG has been selling major assets after getting a bailout during the financial crisis.

On the economic front, revised productivity data for the third quarter showed an increase of 3.0%, which was above the 2.7% increase that had been expected by the Briefing.com consensus. The Fed will release a statement and projections for the economy Wednesday. Economists are almost unanimous in believing that the Fed will not begin winding down its stimulus program just yet.

In ETF trading on Monday, the Junior Gold Miners ETF (GDXJ) is outperforming other ETFs, up about 2.9% on the day. Components of that ETF showing particular strength include shares of DRDGOLD (DRD), up about 36.9% and shares of Brigus Gold (BRD), up about 33.5% on the day. Underperforming other ETFs today is the iShares Mortgage Real Estate Capped ETF (REM), down about 0.4%.

All of our ETFs in the Spotlight reversed course and edged up. I have adjusted the High points, used to calculate the trailing stop losses, for YTD distributions, as you can see in the second table below:

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ETFs/Mutual Funds On The Cutline – Updated Through 12/13/2013

Ulli ETFs on the Cutline Contact

Below are the latest ETF Cutline reports, which show how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs/MFs are positioned.

The first report covers the ETF Master List from Thursday’s StatSheet and includes 398 ETFs, of which currently 320 (last week 334) are hovering in bullish territory.

The second report includes only High Volume ETFs. To clarify, 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 some 93 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. 65 ETFs (last week 67) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 719 (last week 774) above the line and 131 below it out of the 859 that I follow.

Take a look:

1. ETF Master Cutline Report     

2. ETF High Volume Cutline Report

3. MF Cutline Report

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms.

If you missed the original post about the Cutline approach, you can read it here.

One Man’s Opinion: Will Investors Have To Focus On Cyclical Sectors In 2014?

Ulli Market Review Contact

92835431Investors in 2014 need to rotate from some of the defensive parts of the equity market into some of the more cyclical, said Andrew Goldberg, Global Market Strategist at JP Morgan Asset Management.

One of the things that JP Morgan keeps track of is the number of countries who have a PMI (purchasing managers’ index) above 50, i.e. manufacturing and services in expansionary territory. The cyclical upturn in the economy is broadly taking hold and it’s time to start rotating from the more-expensive higher-yielding names into the more cyclical sectors, he noted.

Asked if sector rotation is more appropriate for the US since valuations in Europe seem pretty attractive (compared to the US), Andrew said broadly speaking if one looks at the index level (in Europe), they are not as cheap as one would like to see. But there are pockets of deep value that can be exploited in Europe and that’s the key.

It sounds like a self-serving thing to say, but it’s absolutely true. Now that correlations have come down, it’s much more about being selective and about stock selection. Not everybody will get it right. But if one tries to play Europe with indexes, it’s going to be much tougher, he argued.

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New ETFs On The Block: Horizons S&P Financial Select Sector Covered Call ETF (HFIN)

Ulli Covered Call Strategy Contact

98396691Ahead of next week’s FOMC meeting, there has been much speculation of a small taper by the US Fed, although markets seem to finally accept that a rate hike won’t happen until 2016. The recent bipartisan deal to avoid a future government shutdown has only strengthened this argument. But this doesn’t bode well for the financial sector which had benefited from a rising yield curve as of late.

An environment of low yields and tight spreads is bad news for commercial lenders and the financial sector as it leads to lower margins. However, since the sector is highly cyclical, it is likely to outperform the markets as the economy continues to mend. Hence, if you wish to limit downside risk in an uneven recovery, you may consider the latest offering from Canada-based Horizons ETF Group.

Horizons USA, the American member of one of the largest collective families of exchange-traded funds in the world, has unveiled the Horizons Financial Select Sector Covered Call ETF (HFIN) offers exposure in an options overlay strategy through covered calls. In a covered call, an investor holds a long position in an asset and writes a call option to generate higher returns from it in unfavorable market conditions.

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12-13-2013

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, December 13, 2013

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2013/12/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-12122013/

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Market Commentary

Friday, December 13, 2013

STOCKS STILL WAVERING UPON FED DECISION

Fri chart

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

Stocks had a mixed close on Friday as investors were cautious after a three-day drop and ahead of the Federal Reserve’s final policy meeting of the year next week. Stronger-than-expected American retail sales data during the week, coming after last week’s forecast-beating jobs report, have increased speculation that the Fed will start winding down its stimulative bond purchases soon. That would reduce the incentive that helped to drive global equities in recent months.

Such concerns have led United States-based funds to withdraw $6.51 billion from stock mutual funds in the last week, the biggest outflow this year, before the Fed’s two-day meeting next week

Emerging markets were also hit this week, with sell-offs in currencies — including the Indian Rupee and Japanese Yen — on concern that tighter Fed policy could sap flows of money into emerging markets and push up borrowing costs there. The prospects for a stronger dollar have in turn hit metals and oil, by making them more expensive for buyers outside the United States.

In the ETF world, materials and Industrials led the ETF herd today posting 0.48% and 0.30% gains respectively. Clearly markets are getting short-term oversold but Friday brought us little economic data leaving us the weekend to ponder the way ahead. Monday and Tuesday should be tense affairs before the FOMC announcement.

With the markets meandering, our ETFs in the spotlight retreated from their yearly highs:

2. ETFs in the Spotlight

In case you missed the announcement and description of this section, you can read it here again.

It features 10 broadly diversified ETFs from my HighVolume list as posted every Monday. Furthermore, they are screened for the lowest MaxDD% number meaning they have been showing better resistance to temporary sell offs than all others over the past year.

In other words, none of them ever triggered their 7.5% sell stop level during this time period, which included a variety of severe market pullbacks but no move into outright bear market territory.

Here are the 10 candidates:

MaxDD

All of them are in “buy” mode meaning their prices are above their respective long term trend lines by the percentage indicated (%M/A).

Now let’s look at the MaxDD% column and review the ETF with the lowest drawdown as an example. As you can see, that would be XLY with the lowest MaxDD% number of -5.73%, which occurred on 11/15/2012.

The recent sell off in the month of June did not affect XLY at all as its “worst” MaxDD% of -5.73% still stands since the November 2012 sell off.

A quick glance at the last column showing the date of occurrences confirms that five of these ETFs had their worst drawdown in November 2012, while the other five were affected by the June 2013 swoon, however, none of them dipped below their -7.5% sell stop.

Year to date, here’s how the above candidates have fared so far:

YTD

This week’s sell off pulled all of our ETFs off their highs, but only modestly so considering the run up they’ve experienced YTD.

3. Domestic Trend Tracking Indexes (TTIs)

Looking at the big picture, our Trend Tracking Indexes (TTIs) retreated with the overall negative tone in the market. However, they remain above their long term trend lines by the following percentages:

Domestic TTI: +3.31% (last Friday +4.34%)

International TTI: +4.45% (last Friday +5.96%)

Have a great week.

Ulli…

Disclosure: I am obliged to inform you that I, as well as advisory clients of mine, own some of these listed ETFs. Furthermore, they do not represent a specific investment recommendation for you, they merely show which ETFs from the universe I track are falling within the guidelines specified.

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READER Q & A FOR THE WEEK

All Reader Q & A’s are listed at our web site!
Check it out at:

http://www.successful-investment.com/q&a.php

A note from reader Mike:

Q: Ulli: What is the difference between the “DD%” and the “trailing stop loss %”?

A: Mike: The DD% refers to the percentage a fund has come off its high. This is the high a fund has made since you purchased it, and it serves as a basis for calculating the trailing sell stop. For example, let’s assume you bought an ETF for $10 and it subsequently moves as follows for the next trading days: 10.05, 9.98, 10.15, 10.21, 10.30, 10.19, 10.14…

The high it has made in this data series is 10.30, which becomes the basis for calculating your 7.5% trailing sell stop, which would be at 9.52. If prices sink through 9.52, without taking out the high of 10.30 first, that would be your trigger point to exit the position.

In my weekly StatSheet listings, you can see the percentage a fund has come off its high in the DD% column. Once that number exceeds -7.5%, it means a sell signal for that fund has been generated. To be clear, if you bought this fund at a different time than shown in the StatSheet, you need to track your own highs (no pun intended) as mentioned above.

Hope this clarifies it.

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WOULD YOU LIKE TO HAVE YOUR INVESTMENTS PROFESSIONALLY MANAGED?

Do you have the time to follow our investment plans yourself? If you are a busy professional who would like to have his portfolio managed using our methodology, please contact me directly or get more details at:

https://theetfbully.com/personal-investment-management/

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Back issues of the ETF/No Load Fund Tracker are available on the web at:

https://theetfbully.com/newsletter-archives/

ETF/No Load Fund Tracker Newsletter For Friday, December 13, 2013

Ulli ETF Tracker Contact

ETF/No Load Fund Tracker StatSheet

————————————————————-

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

https://theetfbully.com/2013/12/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-12122013/

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Market Commentary

Friday, December 13, 2013

STOCKS STILL WAVERING UPON FED DECISION

Fri chart

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

Stocks had a mixed close on Friday as investors were cautious after a three-day drop and ahead of the Federal Reserve’s final policy meeting of the year next week. Stronger-than-expected American retail sales data during the week, coming after last week’s forecast-beating jobs report, have increased speculation that the Fed will start winding down its stimulative bond purchases soon. That would reduce the incentive that helped to drive global equities in recent months.

Such concerns have led United States-based funds to withdraw $6.51 billion from stock mutual funds in the last week, the biggest outflow this year, before the Fed’s two-day meeting next week

Emerging markets were also hit this week, with sell-offs in currencies — including the Indian Rupee and Japanese Yen — on concern that tighter Fed policy could sap flows of money into emerging markets and push up borrowing costs there. The prospects for a stronger dollar have in turn hit metals and oil, by making them more expensive for buyers outside the United States.

In the ETF world, materials and Industrials led the ETF herd today posting 0.48% and 0.30% gains respectively. Clearly markets are getting short-term oversold but Friday brought us little economic data leaving us the weekend to ponder the way ahead. Monday and Tuesday should be tense affairs before the FOMC announcement.

With the markets meandering, our ETFs in the spotlight retreated from their yearly highs:

Read More