Last Week In Review: ETF News And Blog Posts To 9/23/2012

Ulli Market Review Contact

In case you missed it, here’s a summary of the ETF topics and market reviews I posted to my blog during the week ending on 9/23/2012.

Market volatility slowed down after the Fed’s QEternal announcement last week, but the question in my mind is whether we’re topping here at these levels, as some technicians seem to indicate, or if it’s a base building process that will set the stage for further advances.

As previously mentioned, the fundamentals are simply not there to even justify current equity levels. Interestingly enough, the NY Fed seemed to concur after having released data about a week ago saying the S&P 500 would be meandering around the 600 level had it not been for the various stimulus attempts.

That’s quiet sobering and makes me wonder what the next step will be after QE-3 turns out to not do anything to improve unemployment. Obviously, buying some $40 billion of mortgage backed securities (MBS) per month will have a secondary effect on equities in that some of that created liquidity will find its way into the markets.

However, how long can that disparity of weak fundamentals and artificially propped up equity prices last? Sounds to me that a bubble is in the making, and the eventual bursting of it is pretty much a sure thing; however, that does not make it imminent. As always, the timing is the big unknown; this is why the use of my recommended sell stop discipline is crucial once the inevitable turnaround happens.

Over past week, we covered the following:

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Spain Is Hoping To Secure Bailout Without Troika Supervision—Will That Work?

Ulli Europe Contact

The question that’s on everybody’s mind is should Spain seek for a bailout to tide over the current crisis?

Even Europe seems to be divided on whether Madrid should actually seek ECB intervention. Spain must ask for ECB help now to avoid panic moments later, feels Luis Garicano, a professor of Economics at the London School of Economics.

Since borrowing costs have moderated after Draghi’s OMT announcement two weeks back, the country’s bargaining power is much better and they can negotiate a better deal, Luis added.

When asked if the process will be a smooth one, Luis said the markets still have faith that things are moving in the right direction, and the process should be smooth in the short-run.

There are, however, a lot of political uncertainties and Madrid needs to move fast. The reset of Europe is trying to redefine the “bailout program” for Spain so that the country doesn’t have to go through a lot of trouble, he noted.

Spain may not have to ask for a full blown bailout because several of of its autonomous regions may start leaving the country. The latest meeting between Catalonian president Artur Mas and Spanish Prime Minister Mariano Rajoy amid growing demand for independence is unnerving.

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New ETFs On The Block: Advisorshares Star Global Buy-Write ETF (VEGA)

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AdvisorShares, the Bethesda, Maryland-based issuer best known for its actively managed strategies has announced the latest addition to its products portfolio, the Star Global Buy-Write ETF (VEGA), marking the firm’s the sixteenth fund launch.

VEGA is the first product into the buy-write segment from AdvisorShares that buys global ETFs and sells covered calls against them with an aim to generate extra income.

The ETF uses a strategy called as “Volatility Enhanced Global Appreciation” or VEGA to provide investors with repeatable and consistent returns across all market conditions. The buy-write strategy involves collecting premium on ETFs or stocks in the portfolio by selling ‘calls’ and lowers volatility levels while simultaneously generating income for investors. Selling a ‘call’ gives the buyer the right to buy, or ‘call’ the security at a pre-decided strike price until the contract expires at a given future date.

‘Call’ options expire worthless if the underlying security doesn’t reach the strike price and the fund gets to keep the premium. On the other hand, if prices of the underlying security fall, losses are cushioned by the premiums collected, thus reducing volatility and trimming down dependence on markets for returns during downturns.

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09-21-2012

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ETF/No Load Fund Tracker Newsletter For Friday, September 21, 2012

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2012/09/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-09202012/

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Market Commentary

Friday, September 21, 2012

MAJOR MARKET ETFS POST FIRST WEEKLY DECLINE IN SEPTEMBER; EUROPE RISES ON SPAIN RUMORS

The major market ETFs posted its first weekly decline for the month, erasing earlier gains Friday. Most indexes closed the day near flat with the S&P 500 dropping for the fourth time in five days as banks tanked and a rally in smart phone maker Apple fizzled.

Despite hitting a five-year high in early trading, the Dow Jones Industrial Average (DJIA) shed 17 points. Breadth within the 30-stock index turned negative with decliners overshadowing gainers 17 to 13 for the day. The blue-chip index closed 0.1 percent lower over last Friday’s close.

The S&P 500 Index (SPX) closed fractionally lower over Thursday’s close and off 0.4 percent for the week, with materials hitting the ground hardest and telecommunications fronting the winners for the day among its 10 business groups.

Treasuries extended a reversal of last week’s selloff to reclaim most of the losses as worries over global economic recovery gained ground following Spain’s delay in seeking a formal bailout.

Yield on the benchmark 10-year Treasury fell one basis point to 1.76 percent after rising as much as three basis points in early session. Down 11 basis points for the week, the benchmark yield is at its level just before the Federal Reserve announced its plans to buy further MBSs and extend low interest rates to 2015.

Meanwhile, the US dollar gave away gains over the euro on Friday following a Financial Times report Spain and the European Union officials are working on a reform plan that could be unveiled as early as next week to facilitate an official bailout next month.

European stock markets rallied, helped by drug makers and banks following media reports Spain is setting the stage for a formal bailout request. The Stoxx Europe 600 index jumped 0.5 percent even though the pan-European benchmark finished 0.1 percent lower over last Friday.

Up 0.5 percent for the week, the DAX 30 index rose 0.8 percent in Frankfurt on Friday, helped by lenders Deutsche Bank and Commerzbank and Pharma and chemical firm Bayer AG.

In the ETF space, homebuilder-linked funds surged after KB Homes (KBH) reported blockbuster Q3 results. KBH flew 17 percent after the home builder reported 4 cents per share profit contrary to loss estimates.

The iShares Dow Jones U.S. Home Construction Index Fund (ITB) surged 1.88 percent, capping its seventh straight week of gains. ITB has gained 14 percent so far this month versus the 3.5 percent gain for the S&P 500. The State Street SPDR Homebuilders ETF (XHB) rose 0.86 percent on the day.

Our Trend Tracking Indexes (TTIs) maintained their strong position on the bullish side of the trend line and closed out the week as follows:

Domestic TTI: +3.88% (last week +3.80%)

International TTI: +5.05% (last week +6.24%)

Have a great week.

Ulli…

Disclosure: No holdings

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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 Lise:

Q: Ulli: have been on the sidelines for the past year in my investments waiting for the other shoe to drop. It now seems with this QE3 unlimited that the markets are going to trend
up higher at least short term 3- 6 months…

Do you think it would be a good time to jump in at least in a small way – or wait until the market corrects before getting back in? I know you can’t predict the future but let’s face it- things are pretty bad everywhere so I would appreciate your opinion.

Thanks in advance- I really like all your commentary.

A: Lise: This might be the worst time of the year to add any equity positions with the notoriously volatile October staring us in the face. You’ve waited this long, why not wait a little longer until we get to the historically stronger market season starting in November or so?

Unless you are very aggressive and execute a strict sell stop discipline, I would not add new equities at these highly elevated levels.

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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, September 21, 2012

Ulli ETF StatSheet Contact

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2012/09/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-09202012/

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Market Commentary

Friday, September 21, 2012

MAJOR MARKET ETFS POST FIRST WEEKLY DECLINE IN SEPTEMBER; EUROPE RISES ON SPAIN RUMORS

The major market ETFs posted its first weekly decline for the month, erasing earlier gains Friday. Most indexes closed the day near flat with the S&P 500 dropping for the fourth time in five days as banks tanked and a rally in smart phone maker Apple fizzled.

Despite hitting a five-year high in early trading, the Dow Jones Industrial Average (DJIA) shed 17 points. Breadth within the 30-stock index turned negative with decliners overshadowing gainers 17 to 13 for the day. The blue-chip index closed 0.1 percent lower over last Friday’s close.

The S&P 500 Index (SPX) closed fractionally lower over Thursday’s close and off 0.4 percent for the week, with materials hitting the ground hardest and telecommunications fronting the winners for the day among its 10 business groups.

Treasuries extended a reversal of last week’s sell off to reclaim most of the losses as worries over global economic recovery gained ground following Spain’s delay in seeking a formal bailout.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 09/20/2012

Ulli ETF StatSheet Contact

ETF/Mutual Fund Data updated through Thursday, September 20, 2012

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

 

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY — since 10/25/2011

The domestic TTI broke through its long-term trend line generating a Sell for this area effective 8/9/2011. Over the recent past, we’ve seen the TTI hovering slightly below and above this dividing line between bullish and bearish territory. The clear break to the upside occurred on 10/24/11 and, effective 10/25/11, a new Buy signal for domestic equities went into effect.

As of today, our Trend Tracking Index (TTI—green line in above chart) has broken above its long term trend line (red) by +3.96%. A break back below it will generate a Sell signal to move out of all domestic equity positions. Be sure to tune into my blog for the latest updates.

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