The ETF/No Load Fund Tracker

Monthly Review—September 30, 2013

US Stocks Finish Higher For Third Straight Quarter

Major US equity indexes advanced in September, posting their third straight quarter of gains even as the markets turned choppy toward the end amid concerns over the ongoing budget debate and in anticipation of a government shutdown.

The blue-chip Dow Jones Industrial Average (DJIA) ended at 15,129.67, up 2.2 percent for the month and 1.5 percent for the quarter.

The benchmark S&P 500 index finished at 1681.55, picking up 3 percent for September. The index added 4.7 percent for the quarter and had hit a record high on Sept 18 after the Federal Reserve unexpectedly refrained from cutting its $85 billion in monthly bond purchases.

The budget battle in Washington continued to weigh on the markets while economic data conveyed the familiar message of modest to moderate growth and low inflation. The US Labor Department announced on Sep 30 it would not release the all-important nonfarm payroll report this week, should the government shut down in Washington though many analysts thought the September report would be a non-event anyways due to the ongoing budget battle and the looming partisan dispute over the nation’s debt ceiling.

Nevertheless, Economists view the payroll report as an important metric as the Federal Reserve ties its policy decisions to the strength of the labor market. The FOMC committee is likely to hold its monetary policy steady when they meet this month in anticipation of elevated volatility.

Stock and bond markets got a boost after Larry Summers, perceived to be the hawkish frontrunner, withdrew his name from consideration to be the next Fed chief.

Also, news of Russia and the US agreeing to decommission Syria’s chemical weapons within a year contributed to the market’s rise.

Consumer spending rose for a fourth month in August, rising 0.3 percent versus an upwardly revised 0.2 percent in the prior month.

On the flip side, the University of Michigan/ Thomson Reuters final September iteration on consumer sentiment dropped to 77.5 from 82.1 in August.

August retail sales growth came in lower than anticipated at 0.2 percent while the total producer price index rose to 0.3 percent. Core PPI, which excludes volatile components like energy and food, remained unchanged.

Separately, data released by Automatic Data Processing Inc showed private-sector employers added 166,000 jobs in September, falling short of the 180,000 gain economists had forecast.

Also, data showed the US economy expanded at an unrevised 2.5 percent in the second quarter, off the 2.7 percent rise economists had projected.

In regards to short-term trends, the pullback from August came to a halt and prices of our main holdings headed back up. Here’s the 30-day chart showing the recovery in price, although towards the end of September we dipped down slightly as angst over the debt ceiling and government shutdown took center stage.

Longer term, the trend has remained bullish despite the bobbing and weaving we have seen. Our main indicator, the Domestic Trend Tracking Index (TTI) remains on the bullish side of the trend line as the chart shows:

Most of our holdings have come off their highs but have not triggered their respective trailing sell stops. The weakest link in the chain over past quarter has been the star performer of the 1^st half of 2013, namely consumer staples (XLP).

It has displayed some sensitivity to the occurrence of higher interest rates, which could change quickly if rates head back down due to slower than expected economic growth. XLP is also closest to triggering its sell stop should more market weakness develop.

With the uncertainty of the negotiations in Washington being far from over, I will monitor our sell stops closely and execute them when necessary. History shows that past budget negotiations have ended with a last minute compromise, with the exception of 2011, causing the market to re-establish its main upward trend.  Nevertheless, an exit strategy is absolutely necessary should Washington’s hot heads prevail.

ETF/No Load Fund Tracker Newsletter For Friday, October 4, 2013

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2013/10/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-10032013/

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Market Commentary

Friday, October 4, 2013

STOCKS IGNORE GOVERNMENT STAND-OFF

U.S. equities snapped their recent two-day losing streak, closing the trading session nicely higher despite the federal government shutdown continuing for a fourth day, with no signs of an end to the budget stalemate in Washington, while the showdown regarding increasing the approaching debt ceiling looms.

The Dow Jones Industrial Average closed 76 points higher (0.5%) at 15,073, reclaiming its mark above the psychologically significant 15,000 level. The S&P 500 Index ended up 12 points (0.7%) at 1,691, and the Nasdaq Composite increased 33 points (0.9%) to 3,808.

Meanwhile, Treasuries were lower, with today’s economic docket void of any major releases, as the September nonfarm payroll report was delayed by the Labor Department due to the government shutdown.

Equities climbed throughout the session while showing little concern over the lack of progress in the Capitol Hill stalemate. The major averages settled near their highs as all ten sectors registered gains.

The Nasdaq was the top performing index with biotechnology making a significant contribution. The iShares Nasdaq Biotechnology ETF (finished higher by 1.1%, also giving a boost to the health care sector (+1.1%). Meanwhile, the traditional technology sector (+0.5%) underperformed as top components traded in mixed fashion.

Also of note, the industrial sector (+0.5%) lagged in each of the past two sessions, and that was the case once again today. Transportation companies ended in-line with the sector (Dow Jones Transportation Average +0.5%) while defense contractors kept the group from logging additional gains.

With regards to countercyclical sectors, health care finished among the leaders while the remaining defensive groups-consumer staples, telecom services, and utilities-underperformed with modest gains of 0.2% apiece.

For the week, the Dow fell 1.2 percent; the S&P 500 lost 0.1 percent while the Nasdaq added 0.7 percent. The S&P 500 has fallen for nine of the past 12 sessions but is within striking distance of reclaiming its 1,700 level.

Government economic reports were empty as shutdown continues. Investors will get some new data to make trading decisions next week in the form of earnings reports. The 3Q earnings season will kick off unofficially on Tuesday, with Dow member Alcoa’s earnings report after the close of trading.

Despite this week’s ups and downs, our Trend Tracking Indexes (TTIs) gave back some ground and closed as follows:

Domestic TTI: +3.02% (last week +3.32%)

International TTI: +6.14% (last week +6.90%)

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 Bill:

Q: Ulli: On 9-6-13, FOCPX dropped 8.8% about $6.66 per share. I called a Fidelity rep and he said because Apple fell 9-10% and FBIOX also declared and paid a Capital Gain and Dividend of around $1.189 per share, but it’s sort of floundering around not moving and actually down three days in a row for the last three days.

I guess my question is, are people getting out because of that drop and should I get out also?

I understand when a lot of people get out of a fund they have to sell off and that makes the fund drop.

A: Bill: Here’s how I look at it:

FOCPX made a high of 80.84 on 8/5/13, which would be the number to use for your trailing sell stop. Say, 7.5% of that high would put a sell signal at a break below 74.78, which happened only briefly before this fund recovered. I could not verify the distribution of $1.19.

If that is in fact correct, you need to reduce the high price by that amount, which would make the new high $79.65. Now you calculate the sell stop point of 7.5%, which brings it down to $73.68, which has not been reached yet.

That’s the process I go through to determine if a stop has been triggered. If it has, I will execute the next day, unless there is a huge rebound in the making.

Hope that clarifies your thinking.

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