Post-Xmas Coma Leads To ETF Inactivity

Ulli Market Review Contact

[Chart courtesy of MarketWatch.com]

In a relatively low volume day, market action was more or less at a minimum. The S&P 500 was essentially flat, bumping up a smidge of 0.01%. The Euro against the dollar is $1.31/Euro and the 10-year Treasury dropped to 2.01%. In commodities, gold is still off its high sitting just above $1,600 while oil broke above $100.

A sign of fear in the European banking system, banks deposited over $535 billion with the ECB, a record amount. Despite efforts by the ECB to boost liquidity and spur lending, many financial institutions still view lending as much riskier than camping their money with the ECB.

Not only will this hurt the credit market, but businesses of all sizes will feel the hurt as well. Although Europe is reaching deep into its toolbox, finding the right tool to solve its financial woes is becoming increasingly difficult.

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ETFs/Mutual Funds On The Cutline – Updated Through 12/23/2011

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 107 (last week 48) 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. Only 16 ETFs (last week 8 ) have managed to hang on in bullish territory after the recent volatility.

The third report covers Mutual Funds on the Cutline. There are currently 176 (last week 37) above the line and 685 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 12/25/2011

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 12/25/2011.

The markets catapulted higher, although on very low volume, which tends to distort the true direction, but it gave the impression that a Santa Claus rally had actually materialized, which brought the S&P 500 back to the breakeven point for the year.

With most traders gone on vacation, there is no telling what next week may bring and whether this is the start of new bullish momentum, or just a flash in the pan that can evaporate as soon as Wall Street’s heavyweights return on the first trading day of the year.

Much will depend on developments in Europe. Any lack of bad news may give the domestic indexes a run to the 1,300 level as most domestic economic news has been better than elsewhere.

This week, we covered the following:

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Sunday Musings: Lowering Risk Exposure Amidst Great Uncertainty

Ulli Market Review Contact

As we turn a corner into a new year, great uncertainty still looms in global markets. Europe lacks the financial firepower to overcome the debt crisis at the moment and political resolve is quite thin. Meanwhile, the rest of the world is prone to contagion.

In this week’s video, I am highlighting Michael Platt, a hedge fund manager who is solely sticking to short-term U.S. Treasuries and German bonds. As argued by Platt, and in line with my views, Europe still faces very large hurdles to restore economic growth and reduce its debt load, prompting a heavily fixed income weighted allocation with lower risk exposure.

While I wouldn’t necessarily be 100% on the sidelines in fixed income since there are still some select equity ETF opportunities, the overall message is right on. Europe’s debt metrics are atrocious and illiquidity in the European banking system is of great concern, with many banks inching toward insolvency. Plus, borrowing costs are still high in Spain and Italy with other Eurozone members at risk of losing their investment grade status.

Although I don’t want to be a pessimist, markets will continue to experience significant headwinds in 2012. Let’s enjoy the holidays while we can before reality sets in again.

ETF Spotlight: Fixed Income ETFs and Downside Risk Protection

Ulli Fixed Income ETFs Contact

Although we’ve seen some gains in the last few days, it can’t distract us from the fact that the global financial landscape is still rugged, with few signs that we’re on the way toward greener pastures.

As I’ve stressed over the course of the past several months especially, downside protection is the key objective amidst a climate where sudden market drops have become commonplace. Thus, I want to discuss fixed income ETFs, which are a buffer against losses although not against trend reversals leading the markets into bear market territory.

In addition to adhering to a strict sell stop discipline, introducing bond ETF exposure at the very least helps to reduce overall portfolio risk. While we’re not necessarily getting massive returns with most bond ETFs, they are beating most equity ETFs year-to-date, which are drenched in red. Hitting singles and not losing your shirt right now is much better than going for the home run and striking out.

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12-23-2011

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ETF/No Load Fund Tracker Newsletter For Friday, December 23, 2011

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2011/12/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-12222011/

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Market Commentary

Friday, December 23, 2011

EQUITY ETFS GET HIGHER RETURNS FROM SANTA BEFORE XMAS

Amidst all the holiday cheer, the major indexes took a step away from reality and embraced the festive atmosphere. Markets worldwide generally had an uplifting day with the S&P 500 rising 0.90% while Europe indices also posted modest gains. The S&P 500 is in the green for 2011, but with one week of trading left in the year, anything can happen to send it back into the red.

The Euro barely moved against the dollar, finishing at $1.30/Euro. And apparently investors have seemed to regain some of their risk appetite as the 10-year Treasury increased to a yield of 2.03%. However, I don’t share the same sentiment about taking on more risk with the exception of a small, select number of less volatile equity/sector ETFs.

In relation to the banking system, the ECB’s liquidity efforts through long-term loans haven’t fully injected confidence for banks to take part. Eurozone banks still have over $450 billion deposited with the ECB, indicating that there’s still some fear about banks not making whole on loans.

Although Italy and Spain have both passed austerity packages, the horizon isn’t looking too sunny. Italy’s consumer confidence has hit a 16-year low, which is only another impediment for the country to get out of an economic lull.

Also, Spain has decided to offer pension increases in line with inflation. I’m not sure how Spain can eradicate its debt load if it can’t stop pandering to its socialist constituents and fail to enforce fiscal discipline. I’m afraid political favor is getting in the way of economic progress.

In the U.S., Congress finally passed a payroll cut extension, although this is miniscule in the grander scheme of things.

In economic data, durable goods orders came in at their highest in 4 months but consumer spending for November came in lower than expectations.

Our domestic TTI (Trend Tracking Index) still remains above its long-term trend line by 2.23%, as it has been barely positive for the last couple months. However, the international TTI is sufficiently in bear territory at -7.91% as the situation overseas is steeped in uncertainty.

My overall ETF outlook hasn’t changed dramatically since late October when the domestic equity ETF buy signal kicked into effect.

We’ve seen some upward movement in the last few days, which may well move into next week. But keeping in mind that Europe’s problems haven’t faded away, maintaining a strict sell stop discipline with a bond ETF bent is an appropriate strategy in our opinion. Despite the doom and gloom mood in markets, I hope you have an enjoyable holiday.

Best,

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 Mark:

Q: Ulli: There has been so much talk about currency/dollar collapse and a global depression occurring very soon. Most are predicting hyper-inflation and say gold ( and a few other investments ) may be the best store of wealth, and the dollar and bonds are going to crash with most everything else.

They urge buying as much gold as you can as soon as you can. Then there are others who are predicting massive deflation. They say gold is going to crash with other commodities and the dollar is going to remain the safe haven. Large cyclical factors not the least of which is the aging baby-boom generation is driving a very long period of slow growth and deflation. Obviously, the choices one makes believing in one theory would be disastrous if the other turned out to be true.

I wonder if you agree with either or neither and have any thoughts of your own? Does your ETF strategy have the ability to prepare us for and see us through a depression? I don’t want to wait to the last minute to do something to prepare for the worst only to find out I have waited too long.

A: Mark: There are plenty of opinions; that’s for sure. It’s also a given that nobody can predict the future, so these are all wild or in some cases educated guesses. To me, it all boils down to trends. As we go forward, the simplest way to identify whether an asset class is worthwhile considering as an investment is by looking at my weekly Cutline reports, which are published every Monday morning.

They clearly identify if an ETF/mutual fund is in an uptrend or not. While that does not guarantee a successful investment outcome, it enhances your odds of being able to better evaluate as to which ETFs are rising and which ones are falling.

No matter whether we’ll have a bull market, a bear market, a recession or depression, trends tend to tell you what’s real amidst the onslaught of news and data, which always seem to cloud the clear vision.

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Back issues of the ETF/No Load Fund Tracker are available on the web at:

https://theetfbully.com/newsletter-archives/