ETF/No Load Fund Tracker Newsletter For Friday, September 6, 2013

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2013/09/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-09052013/

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Market Commentary

Friday, September 6, 2013

CALM BEFORE THE STORM?

U.S. equity markets closed the trading day near the flat line, bouncing back from their early session lows, which may have been due to an increase in geopolitical strain as President Obama was met with resistance from the global community regarding his plan to carry out a limited military strike on Syria.

Political concerns overshadowed slower-than-forecast jobs growth that eased concern about reductions in Federal Reserve stimulus. For the week, the S&P 500 finished up 1.4 percent and the Nasdaq was up 2 percent. The Dow rose 0.8 percent to snap a streak of four weekly declines.

Prior to the opening bell, it was reported that nonfarm payrolls increased by 169,000 in August, below the consensus of 175,000. The unemployment rate, however, slipped to 7.3% from 7.4%, the lowest since 2008, but that was the result of a drop in the labor force participation rate to 63.2%. The one bright spot could be found in aggregate income, which increased 0.6%. This plodding along of employment growth, no matter how poorly and despite constant revisions to the downside, may be the key reason for the Fed to announce later this month that it will start to taper its asset purchases.

Immediately following the report, crude oil, equity futures, treasuries, and gold futures jumped to their highs. The opening hour saw the S&P lose its 50-day average after Russian President Putin said his country will assist Syria in the event of an external attack.

With the continued uncertainty surrounding the situation in the Middle East, crude oil climbed throughout the day. The energy component ended higher by 2.0% at $110.54 per barrel, registering its highest close since May 2011. Elsewhere, gold futures climbed 1.0%, contributed to the strength of miners as the Market Vectors Gold Miners ETF advanced 1.7%. Consumer staples (+0.1%) and utilities (+0.6%) outperformed as the retreat in yields provided the two groups with a measure of support.

The equity markets found strength in the first week of what could be a volatile September. Stocks were buoyed by signs of U.S. economic prosperity. Additionally, stocks appeared to get a win-win on the Fed asset tapering debate. Data suggested the economy may be healthy enough to withstand a deceleration in stimulus, while Friday’s mixed nonfarm payroll report continued to call into question the quality of the job market recovery, fostering optimism that the Central Bank will use caution in reining in its asset purchases.

Our Trend Tracking Indexes (TTIs) recovered from last week’s drubbing and closed higher:

Domestic TTI: +1.28% (last week +0.84%)

International TTI: +4.31% (last week +2.43%)

Have a great week.

Ulli…

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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 Scott:

Q: Ulli: What is the sell stop rule on an ETF Bond fund?  Is it the same as on a Mutual Bond Fund?

A: Scott: Yes; it’s the same for either. I use 5%, and we’ve been out of bonds months ago when the stop was triggered.

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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/

The ETF/No Load Fund Tracker

Monthly Review—August 31, 2013

Major Equity Indexes Slip And Slide During August

All major domestic indexes headed south during the month of August as higher interest rates, continued taper talk and the Syrian war drums proved to be too much of an obstacle to overcome.

The month started out positive with the S&P 500 reclaiming its psychologically important 1,700 level during the first few days, but that was the highlight. The benchmark index, and our major holdings in XLP and DVY, reversed their trend and headed towards bear market territory.

The pullback was slow and steady with only a few brief dead cat bounces as the following chart shows:

It’s interesting to note that none of our trailing sell stops were triggered, although XLP came within 1% of being liquidated but, towards the end of the month, all indexes headed back up slightly.

Looking at the big picture, our main gauge, the Domestic Trend Tracking Index (TTI), slipped as well and, on the last trading day of the month, came within 0.84% of signaling an “all-out” liquidation for our domestic holdings. Here’s the TTI chart:

We currently remain above the trend line and will continue to hold on to our current positions. This week’s payroll report and unemployment rate may give us some clue as to whether the Fed will actually reduce its QE efforts or not.

Current consensus is that they will follow through and implement a reduction, however, if the reports come in worse than expected, like less job creation and a higher unemployment rate, you could see a huge rebound rally as bad news is good news, and the Fed’s tapering may not actually happen. If the fact that economic bad news can actually be good news for the markets sounds perverse to you, you’re not alone.

We are living in a world where unintended consequences can influence markets all of a sudden, which means that we always have to be prepared to step aside to the safety of the sidelines. Whether it’s “taper talk” by the Fed, or the beating of the Syrian war drums, depending on the magnitude of the news event, markets can rally in the face of adversity or sink and head towards bear territory on what you and I might consider positive developments.

The trend is not only our friend, but also the only thing that is real in this all too unreal environment. As always, I will be prepared to execute our sell stops when the markets tell me that it’s time to do so. Not having an exit strategy under these conditions can be very costly to your financial health once the inevitable correction occurs.