European Major Market Indexes Rise On Greek Hopes

Ulli Market Review Contact

The US markets remain closed today as the country celebrates the President’s day. Meanwhile, the negotiations between Athens and the European Finance Ministers over the second bailout package continue in Brussels today. Members of the so-called Eurogroup, made up of 17 members that use the common currency, are discussing whether Greece has done enough to qualify for another round of bailout money.

Latest measures taken by Athens may not be sufficient to bring down the country’s debt-to-GDP ratio to 120 percent by 2020 from the ruinous 160 percent now, a latest IMF/ECB/EC report accessed by Reuters suggest. The baseline scenario predicts the country’s debts to fall to 129 percent of GDP by 2020, well above the targeted and ‘sustainable’ 120 percent mandated by the EU.

Additional debt relief from official and private sectors are required, the 9-page report observed. Internal devaluation of the euro is required to restore Athens’ competitiveness, inevitably driving the county’s debt-to-GDP ratio up, the report says. Thus the Greek program will remain accident-prone with the debt level remaining at 160 percent by 2020 if the country fails to follow through structural reforms and keeps delaying implementation of tighter fiscal policies, raising questions over its sustainability.

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ETFs/Mutual Funds On The Cutline – Updated Through 2/17/2012

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 353 (last week 332) of them 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. 74 ETFs (last week 67) have managed to move into in bullish territory after the recent run up.

The third report covers Mutual Funds on the Cutline. There are currently 808 (last week 762) above the line and 53 below it out of the 861 that I follow.

Take a look:

1. ETF Master Cutline Report

2. ETF High Volume Cutline Report

3. MF Cutline Report

Last Week In Review: ETF News And Blog Posts To 2/19/2012

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 2/19/2012.

The markets picked up steam again with the S&P 500 gaining some 1.3% for the week, as opinions prevailed that a disorderly default in Greece will not happen. Even though bullish sentiment slowed a little towards the end, that was to be expected ahead of a 3-day weekend with the Euro FinMin meeting scheduled for Monday.

Even though the second financial package is supposed to be approved, you never can be certain with recent history proving the unraveling of many attempts.

This week, we covered the following:

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Asset Diversification During Changing Times

Ulli ETF News Contact

While Greece is unraveling and remains under threat of disorderly default, we can’t deny that equity ETFs have had a favorable run since the start of the year. While I have advocated a less risky portfolio over the last several months due to deteriorating conditions in Europe, acting too conservatively can have its drawbacks.

As seen in this discussion, although equity activity has dropped as of late, equities have done surprisingly well with some of the historical correlations not holding in current times. 1-1/2 weeks ago, I added international equity ETFs in addition to domestic equity ETFs because their respective trend tracking indices are well above their trend lines. Thus, in order to capture some of the upside, it is crucial to take advantage of market bullishness in the short-term while maintaining a sizeable bond ETF allocation.

It’s unrealistic to fully realize positive trends as we want to see steady upward momentum first before adding exposure in a particular area. But with low volatility in recent weeks, this can be a solid entry to add a couple equity ETFs if you can afford to be a little more aggressive. Yet, as always, make sure you have trailing stop losses in place.

A Precedent For Default: Will Greece Fall Again?

Ulli Market Commentary Contact

As Greece heads for treacherous waters in this debt storm, I can only wonder whether Greece will soon default. Amidst the political turmoil among Greek parties and disagreements between Greece and other Eurozone members, this beckons the following question: Can Greece avoid disorderly default?

Despite recently passed austerity measures including a cut in government jobs, a decrease in the minimum wage, as well as reduced pension benefits, it doesn’t address Greece’s long-term problems. A 50% haircut on its current debt would only lower Greece’s debt-to-GDP ratio to 120% by 2020. And the real economy would suffer immensely as already seen by rising unemployment and falling incomes.

Let’s not forget that Greece has defaulted many times before, raising doubts as to whether it can stay in the Eurozone. There has unfortunately been a pattern of Greece accepting loans and failing to pay interest payments on debt in a timely manner. To make matters worse, since Greece’s independence in 1822, it has been in a state of default for over 50% of the time.

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02-17-2012

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, February 17, 2012

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2012/02/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-02162012/

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Market Commentary

Friday, February 17, 2012

US STOCKS END WEEK ON A HIGH, ETFS ARE THE NEW BELLWETHERS OF THE MARKETS

US stock indexes closed higher for the week with the DJIA closing within sniffing distance of 13,000 on a solid week though investors remained wary of crucial vote on Greek on Monday.

Amid a thinly traded Friday ahead of a three-day holiday weekend, all major indexes posted healthy gains on positive economic developments and hopes of an early Greek settlement.

The DJIA closed higher with a gain of 0.35 percent, while the S&P edged up 0.2 percent but the Nasdaq closed 0.3 percent lower over yesterday. Meanwhile, a research report prepared by technology and trading firm ConvergEx Group shows that nearly $8 billion has flowed out of the US equity mutual funds while US equity ETFs have attracted approximately the same amount during the period.

A whopping $34 billion has flowed in ETFs through Feb 13, which is more than double the weekly $2.6 billion inflow recorded last year, in a sign that to know the pulse of the financial markets, it’s important to know the movements in the ETF universe.

Meanwhile global shares rose on Friday though clear differences cropped up among Greece’s paymasters over the proposed €130 billion second round of bailout payments. There was no guarantee that a decision on Greece will be reached on Monday, warned Eurogroup leaders amid reports of the German cabinet splitting up on the Greek default issue.

Traders however, remained hopeful of a settlement rather than a default which may jeopardize a fragile global recovery, pushing the French and the German indexes by 1.4 percent each.

The benchmark MSCI Index, a barometer of emerging market stocks, closed 1.2 percent higher, registering a 15 percent growth since the start of 2012.

The multitude of options being considered includes a bigger haircut for private lenders and putting part of the bailout money, equivalent to 9-12 months of government spending, in an escrow account to exert greater control over Greece’s expenses.

Investors’ risk appetite got a boost over rumors that the European Central Bank is preparing for a debt swap to push Greek maturing obligations behind. France, however, stood solidly behind Athens with Finance Minister Francois Fillon reiterating that the Europeans must honor their commitments to ensure Greece avoid a messy default.

Prices of US treasuries fell as markets remained cautiously optimistic over a Monday €130 billion Greek-deal. The single currency rose 0.2 percent against the greenback with the EUR/USD pair changing hands at 1.3162. US crude oil prices jumped to their highest level since last May to $103.2 per barrel.

Trend wise, there is no denying that we are in a bull market, as our Trend Tracking Indexes (TTIs) confirm. The Domestic TTI has moved into bullish territory by +5.39%, while its International cousin has crossed above the line by +3.88%, since that ‘Buy’ signal was issued on 2/8/12.

It’s been a strong move to the upside since the beginning of the year with hardly a correction in sight. That obviously can’t go on forever, which is why I continue to pound on the theme of you having your sell stops in place. We’re living in an environment with much uncertainty and are moving in unchartered territory in terms of global debt issues.

Be prepared to exit should the current trend hit a brick wall and shift into reverse.

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 RW:

Q: Ulli: I would be interested if you could take a moment and either let me know or view a Renko chart and see how well that mirrors your proprietary trend following. You can see a free Renko Chart at:

stockcharts.com

Click the free charts tab then try sharp chart and put in a symbol such as SPY.

Then under type: select Renko chart.

You then can set up anything else you like on the chart. Renko charts just try and display trend changes only and do not take into consideration TIME or VOLUME.

I am looking at a Renko of SPY and it has the trend change (on daily charts) around Oct 5th, 2011. Since you follow a Trend Following methodology wondering if this type of charting may be more apropos as this is its design.

Since this time you as well as most of us struggled with whether it was a valid trend change or just a precursor to a whipsaw with all the events going on in Europe financial arena. Now it seems as though it’s now ran very far since Dec 19th and many of us are again late catching that train as it seems to have left the stop that is of course unless a traditional Feb has a real nice pullback.

One other question, when you take on a new customer and the market is in a middle of a trend, what methodology do you use to enter their funds. Do you wait for some pullback or since you proprietary method has an uptrend you just invest at that time?

A: RW: Interesting Renko charts. They seem to track things more on a short term basis than I do. Nevertheless, their Buy of around 10/5/11 was fairly close to our Domestic Buy effective 10/25/11…

In regards to taking on a new customer during mid-cycle, which happens all the time, I establish their risk tolerance as shown in the second video clip on my blog’s main page (below the first 2 sponsors on the right). That will determine how much I deploy. Just a couple of days ago, I set up 2 new clients in a 100% invested position; one of them in model ETF portfolio #2 and the other one in #4.

Remember, if you are working with sell stops, you can be a little more aggressive as long as it goes along with the client’s risk profile.

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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/