ETF/No Load Fund Tracker Newsletter For Friday, June 8, 2012
ETF/No Load Fund Tracker StatSheet
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Market Commentary
Friday, June 8, 2012
MAJOR MARKET ETFS POST BEST WEEKLY GAIN OF THE YEAR; EWP RISES, VIXY CRASHES
US stocks headed higher Friday to extend gains for the fourth straight day and capping their best week of the year amid rumors that Spain will officially request for bailout funds for its stricken banks on Saturday, and Europe will move decisively to reign in its sovereign debt crisis.
Yeah right! Past experience with these types of rumors has led to market disappointment, as the Europeans have repeatedly displayed an uncanny ability demonstrating that there is a huge discrepancy between a meaningless announcement and decisive action.
Treasuries closed lower for the week as risk sentiments improved over a Commerce Department report that showed trade deficit narrowed in April with imports falling faster than exports as a soft economy slowed down demand, cutting investor-appetite for safe-haven assets.
The Dow Jones Industrial Average (DJIA) climbed 93.24 points to close at 12,554.33, up 3.6 percent over last Friday. The S&P 500 Index (SPX) added 10.67 points to finish at 1325.66, gaining 3.7 percent for the week with nine out of ten components rising among the index’s 10 business groups. Financials and telecommunications fronted the winners list while energy declined.
The NASDAQ Composite Index (COMP) added 27.40 points to settle at 2858.42, up four percent for the week.
Treasuries trimmed earlier gains after a report from the US Commerce Department showed wholesale stockpiles in April grew twice as fast as in March. The yield on the benchmark 10-year Treasury note finished one basis point lower at 1.63 percent after falling as much as eight basis points earlier. Yield on 30-year bonds remained unchanged at 2.75 after tumbling nine basis points during the day’s trade, but still up 23 basis points for the week.
ETFs in the news:
Markets reacted favorably to speculation that Spain is likely to request a recapitalization of its banks officially on Saturday, despite Madrid maintaining it would wait till audits of its banks are complete.
However, the downgrading of Spanish sovereign ratings by Fitch has added to the urgency of shoring up the country’s banks. If Spain requests a bailout on Saturday, it will certainly help bring down the country’s borrowing costs, assuming the appropriate lifeline is thrown and conditions are accepted, as Madrid remains nearly shut-out from capital markets.
The iShares MSCI Spain Index Fund (EWP) emerged one of the top gainers for the day, adding 2.54 percent for the day. EWP tracks the MSCI Spain index and is heavily biased towards financial services which nearly accounts for 40 percent of its holdings. Its top 10 holdings include three bank stocks.
Better than expected US inventory stockpile proved positive for the homebuilders as higher inventory levels indicate stronger demand and better factory output. The State Street SPDR Homebuilders ETF (XHB) ended in the greens, adding 2 percent on the day
As stocks rallied ahead today, the fear-tracking CBOE Volatility Index continued to slide, losing 2.26 percent for the day. The ProShares VIX Short-Term Futures ETF Profile (VIXY) emerged as one of the biggest decliners, losing 5.43 percent on the day. The Volatility Index has dropped considerably this week, but still remains in the fear zone.
Our Trend Tracking Indexes (TTIs) inched up as well. Domestically, we remain on the bullish side of the trend line while, internationally, we are seeing a temporary improvement from the deep bearish condition.
Here are this week’s closing numbers:
Domestic TTI: +2.08% (last week +1.24%)
International TTI: -3.91% (last week -6.73%)
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 Walt:
Q: Ulli: I do not understand how to use the DD% number. I assume a negative number is bad, a positive number meaning no drawdown has occurred? Please clarify.
A: Walt: Yes, when an ETF rallies, the DD% will improve and go lower. The 0.00% means that this ETF has just made a new high since the cycle began and is therefore in a solid uptrend…. That’s a good thing.
If you look at the StatSheet every week, you see some DD percentages improving and others worsening depending on market direction.
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