Back To The Downside – Europe Weighs Down on Equity ETFs

Ulli Market Review Contact

[Chart courtesy of MarketWatch.com]

Despite an EU Summit that appeared to hint towards fiscal unity and discipline, markets didn’t quite agree with that sentiment today. The S&P 500 slid 1.49% while European markets also had a rough day. With cracks still showing in Europe’s financial system, the Euro took a dip against the dollar down to $1.32/Euro.

Unlike most down days though, volatility actually slightly subsided with the VIX falling 2.69%.

However, investors sought out government securities as the 10-year Treasury dropped 2.10% to yield 2.01%. Meanwhile, gold and oil fell 2.85% and 1.54%, respectively.

Moody’s announced that it will conduct a review of Eurozone sovereign credit ratings in the wake of the summit. In essence, last week’s summit failed to inspire much confidence. Anyways, I’ve seen little evidence that Europe currently has the tools to get out of its debt crisis unscathed.

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ETFs/Mutual Funds On The Cutline – Updated Through 12/9/2011

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 397 ETFs, of which currently 101 (last week 84) 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 90 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 15) have managed to hang on in bullish territory after the recent volatility.

The third report covers Mutual Funds on the Cutline. There are currently 154 (last week 110) above the line and 707 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 12/11/2011

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 12/11/2011.

Relief from the European summit that more fiscal discipline will be part of a future agreement involving all 26 EU members (except England) kept the major market indexes elevated.

Even though no structural issues were resolved, it looked like Wall Street was simply relieved that nothing worse had come out of the meetings. Whether that will sustainable remains to be seen.

This week, we covered the following:

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Eurozone Re-Cap: Is A Long-Term Solution in Sight?

Ulli Market Commentary Contact

Although the EU Summit has come to a close this week, it’s still hard to see whether the Eurozone has the tools to rid itself of its crisis. The U.K. has decided not to agree to the new EU treaty, creating some discord among the 26 other European members who agreed.

However, greater problems are still at hand, especially whether European banks can be adequately recapitalized, a reoccurring concern this week, and whether Europe can generate the necessary financial firepower to begin eliminating the debt of countries such as Italy and Spain among others.

The ECB has had to step up and act beyond its traditional scope as of late to keep borrowing costs down while trying to improve liquidity. How long this can go on without external intervention remains to be seen.

The interview below considers a possible outlook for Europe in the wake of the new treaty changes and if we can stay optimistic in the long-term.

http://www.youtube.com/watch?v=WelzeLNJO6I

 

The 2011 Roller Coaster Ride — AKA The Stock Market

Ulli Market Review Contact

If you had trouble following the major trends in the domestic market this year, you’re not alone. One trader reviewed the highlights in this recent summary:

  1. Crash into early August, then hit a low where market rallied up 10% in six days.
  2. We then dropped about 7% in 3 days.
  3. We then rallied up about 9% in 7 days.
  4. And then in 2 days we dropped about 8%.
  5. In 2 days we rallied up 5.5%.
  6. And then next 2 days we dropped 6%.
  7. And the next 5 days we rallied up 7%.
  8. And the next 3 days we dropped about 9%.
  9. Next, we rallied up about 7%.
  10. The next 4 days we dropped about 10%.Culminating with the wash out on Oct 4.
  11. And then in 5 days we rallied up 11%.
  12. Sat around. Had two big gaps into the highs of late August and then we did two big gaps down.
  13. A little rally up.
  14. Another big day down.
  15. Within a day, a gap up. Then another big drop.
  16. Went down about 9% in seven days.
  17. And this week on two days that gapped up, a total of about 640 points.
  18. We finished with a rally this week of 8% and this one was for the books. You couldn’t get in because they were gaps.

No wonder that investors are confused and irritated. With the European debt circus in full swing this weekend, this roller coaster ride appears to be far from being over. Be on alert at all times and execute your trailing sell stops once they get triggered.

12-09-2011

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, December 9, 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-12082011/

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Market Commentary

Friday, December 9, 2011

MARKETS FINISH OFF THE WEEK STRONG – COULD THIS BE THE TURNING POINT FOR EQUITY ETFS?

Yesterday’s fears coming out of Europe seemed to escape the minds of investors as major market ETFs and equity ETFs rose today. The S&P 500 went up 1.69% and Europe’s indices were just as exuberant. In addition, the 10-year Treasury increased to yield 2.05%

The VIX fell below the 30 level once more, dropping 13.76% to 26.38. While I hesitate to say we’re in risk off mode, we certainly have entered a momentary period of reduced volatility, though that can change in one day.

Some of the major talk coming out of the EU Summit has been the UK’s refusal of EU treaty changes spearheaded by Germany and France. While 26 countries have agreed to fiscal unity which includes stricter measures of balancing budgets, UK Prime Minister David Cameron has remained resolute in his opposition. Although Germany and France have demonstrated some much needed leadership, it’s no guarantee that the Eurozone can be saved.

Despite a good day for markets in Europe, Moody’s handed out ratings downgrades to three major French banks: BNP Paribas, Societe Generale, and Credit Agricole. The situation doesn’t look so rosy for France’s public and private finances as ratings agencies have also suggested a ratings downgrade for France’s sovereign debt.

Currently, it’s slightly more comforting to see that Italian and Spanish 10-year bond yields have fallen below the dangerous 7% level, but that doesn’t detract from the long-term debt burden these countries have to pay down while trying to restore economic growth.

The ECB has implied that it would temporarily halt debt purchasing seeing as it has significantly intervened in markets to the dismay of some EU leaders. However, yields could quickly rise above 7% again if market sentiment weakens, which could again prompt steadfast ECB action. Already, Italy’s 10-year bond jumped to 6.5% today after having dipped below the 6% mark.

Also, Eurozone nations have decided to offer $267 billion in loans to the IMF to help the Eurozone as a whole. But Europe will surely still need outside assistance.

With regards to our trend tracking indices, the Domestic TTI is still above its long-term trend line at +2.82%, while the International TTI remains well entrenched in bear territory at -5.88%. As has been the case in the past few weeks, I am only selectively seeking some opportunities in the domestic equity ETF space, but international equity ETFs continue to be off limits for us.

Overall, it’s been difficult to gain a clear perspective on where markets may be heading short-term. Yet, we must look to the long-term given the information we have now, which suggests that primarily maintaining low risk assets via bond ETFs is the most logical choice at the present time.

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 Ian:

Q: Ulli: Thanks again for all your insights and wisdom you share with us neophytes. Would you be kind enough to use your current cutlist to explain which ETFs are worth buying, and your logic for such a recommendation? I really need to read your thoughts on how you parse the list and the criteria you use to determine which funds to purchase.

Thanks so much!

A: Ian: Much depends on your risk tolerance. I prefer buying back in when the domestic TTI is in bullish territory and when individual ETFs/MFs have also crossed their trend lines to the upside.

Take a look at Monday’s HV ETF Cutline report, and you’ll notice a few equity funds on the plus side. As an example, I have added a small position in DVY a few days ago, since it’s less volatile due to its dividend paying feature. There are several other ones and, as I have disclosed before, we have exposure in XLP as well.

Again, the final decision will have to be yours. I can only provide you with data to help the decision making process.

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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/