A Timid Day for Equity ETFs

Ulli Market Review Contact

[Chart courtesy of MarketWatch.com]

Markets were relatively stagnant today despite the cancellation of a Greek bailout meeting. The atmosphere is becoming increasingly tense as the deadline looms, putting Greece’s chances of receiving bailout funds in jeopardy.

Despite flatness in equities, the 10-year Treasury dipped to 1.92%, a sign that investors remain in a risk adverse mood. A disorderly default in Greece could propel further flight to safety.

To add more insult to injury, Greece’s economy contracted almost 7% in 2011, meaning that there will be plenty of suffering in 2012 and the following years due to the new, stricter austerity measures. Greek PM Papademos has noted that a failure to resolve the country’s predicament can quickly lead to chaos.

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Major Market ETFs Rally Following Greece’s Vote

Ulli Market Review Contact

[Chart courtesy of MarketWatch.com]

The major market indexes retraced Friday’s sell off, and then some, as Greece’s parliament voted in favor of strict financial reforms in order to receive the latest bailout package of at least $130 billion Euros.

Athens burned for most of the night as protestors rioted and questioned the wisdom of having to endure more hardship after years of recessionary conditions along with an unemployment rate that is approaching 21% and likely to get worse.

It’s still uncertain whether the bailout will actually go through, as the Eurozone Finance Ministers will meet this Wednesday and will have to be convinced that Greece will abide all terms.

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ETFs/Mutual Funds On The Cutline – Updated Through 2/10/2012

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 332 (last week 340) 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. 67 ETFs (last week 72) 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 762 (last week 774) above the line and 99 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 2/12/2012

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 2/12/2012.

Friday’s pullback left the major indexes almost unchanged for the last week. All eyes are now on the (hopefully) final act of the Greek debt opera as party infighting continued while the realization of a dark and unknown future seems to have sunk in.

February 15th has been announced as a cutoff point to agree on a new bailout deal. Otherwise, sufficient funds to meet the March repayments will not be available.

This week, we covered the following:

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All Eyes On Greece – The Saga Continues

Ulli Market Commentary Contact

In what seems to be a never ending saga, the Greek crisis has now hit another critical point. While the austerity measures agreed to this week were a necessary step towards cutting Greece’s debt load, it came at great political and social costs as internal unrest has hit a new fever pitch.

There is still no deal with bondholders, and no assurance from the Troika that Greece will receive a bailout payment in March. A lack of confidence in Greece’s ability to impose long-term fiscal discipline is understandably a major concern, as Merkel and others are now perturbed by Greece’s indecision, which has shaken markets.

To get an overview of recent developments in Greece and what might be store in the coming weeks, check out this video from the BBC. At the present time, Greece’s economic future depends on whether it can set political bickering aside and establish a credible plan to cut its debt in an orderly fashion. Otherwise, default may soon arrive.

Potential Value Added From Commodity ETFs

Ulli Uncategorized Contact

While equity ETFs have displayed some impressive form this year, they have certainly hit some rough patches in the last few years and perhaps may again in the near future. Having a sizeable fixed income ETF allocation is certainly a prudent way to minimize your risk exposure, especially if you have equities and bonds spread across various asset classes.

But for those looking to enhance diversification in their portfolios and don’t mind taking on a little additional risk, commodity ETFs are a viable option. As far as our model portfolios are concerned, we have some commodity ETFs. For instance, our Aggressive Portfolio contains PowerShares DB Commodity Index (DBC), which contains oil, gold, and metals holdings. Not to mention, our go-to mutual fund (PRPFX), includes gold and silver ETFs.

However, according to Warren Buffet’s sage advice, some of which he recently disseminated, investing in commodities such as physical gold or gold ETFs isn’t such a good idea. The Oracle of Omaha has a point about better long-term performance in equities, but if you’re looking to add minimal gold exposure in the short-term, it can help to serve as a hedge. Not to mention, the SPDR Gold Trust ETF has returned over 25% in the last 12 months.

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