ETF/No Load Fund Tracker Newsletter For Friday, December 9, 2011

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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.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 12/08/2011

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ETF/Mutual Fund Data updated through Thursday, December 8, 2011

If you are not familiar with some of the terminology used, please see the Glossary of Terms.

 

 1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY — since 10/25/2011

The domestic TTI broke through its long-term trend line generating a Sell for this area effective 8/9/2011. Over the recent past, we’ve seen the TTI hovering slightly below and above this dividing line between bullish and bearish territory. The clear break to the upside occurred on 10/24/11 and, effective 10/25/11, a new Buy signal for domestic equities is in effect.

As of today, our Trend Tracking Index (TTI—green line in above chart) has broken above its long term trend line (red) by +2.25%. Tune into my blog for the latest updates.

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Equity ETFs Get a Rude Wake Up Call Amid European Woes

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[Chart courtesy of MarketWatch.com]

After days of relative inactivity, markets finally erred to the downside as news coming out of the EU summit highlighted the difficult landscape that Europe continues to face.  The S&P 500 fell 2.11% while European indices dropped as well. For instance, France’s CAC 40 experienced a 2.53% dip.

For the first time in a couple weeks, the VIX had a large upswing, jumping 6.70% to end above the 30 level once more. And in line with heightened risk, the 10-year Treasury rate dropped 2.23% to yield 1.97%. Commodities also took a hit today with gold and oil falling 1.90% and 2.45%, respectively. In essence, bad news finally seeped into global markets.

As EU leaders met in Brussels today to kick off the EU summit, the outlook isn’t getting any better. There’s significant concern around whether treaty changes can be agreed upon by all Eurozone members and be fully implemented.

Additionally, uncertainty looms in relation to whether the Eurozone will combine the EFSF and ESM to create a massive bailout fund. “Uncertainty” is becoming a dirty word that can only continue to arouse fears that Europe doesn’t have a long-term solution in place.

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Major Market ETFs Anchored in Uncertainty Ahead of EU Summit

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[Chart courtesy of MarketWatch.com]

In yet another flat day on Wall Street, the S&P 500 trudged forward only 0.20% with other indices following suit in terms of minimal price volatility. The VIX only rose 2.60% today in what has been a quiet week to say the least.

Meanwhile, the dollar remained unchanged against the Euro at $1.34/Euro while commodity action was relatively minimal. With the EU summit coming up tomorrow, markets will probably start making some larger magnitude moves once some concrete news starts coming out.

Ahead of the EU Summit, the G20 is planning on instituting a bailout fund via the IMF to aid Europe. The proposed plan is a $600 billion lending facility. Now that Germany has expressed discontent over combining the EFSF and ESM bailout funds, the Eurozone’s going have to start getting creative if it wants to get out this mess. The fact that there’s nothing resolute continues to leave me skeptical of whether the Eurozone situation can turn for the better soon.

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7 ETF Model Portfolios You Can Use – Updated through 12/6/2011

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While the S&P 500 made up lost ground during the past 5 trading days by gaining +5.27%, our portfolios lagged but most are still ahead on a YTD basis.

The reason is, of course, that we remain underinvested in equities at this time, after huge drops in the recent past have stopped us out of most holdings. To me, upside momentum is still not convincing enough to take on greater risk.

Even though our Domestic TTI (Trend Tracking Index) has climbed above its long-term trend line by +2.94%, developments in Europe, especially the upcoming EU summit, is bound to have an effect on market direction. There will be either disappointment or euphoria.

I continued to sing the same old song about capital preservation, since I believe the downside risk is far greater than upside potential.

Take a look at the latest update:

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Which Way Will ETFs Go? – Markets Stuck in the Middle

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[Chart courtesy of MarketWatch.com]

Despite some warnings yesterday concerning Eurozone downgrades, major market ETFs seemed relatively unaffected. The S&P 500 bumped up a paltry 0.11% as volatility remained minimal once more as the VIX rose only 1.04%.

Once again, the dollar/Euro exchange rate barely moved while commodities such as gold and oil were pretty flat. Although we haven’t seen massive daily drops lately, I wouldn’t bet against the fact that downward market pressure is likely in the coming weeks.

Ahead of the EU summit later this week, there are now talks that the Eurozone is considering some new options to boost its financial firepower. In light of difficulties to leverage the $590 billion EFSF, EU leaders are considering combining the EFSF and the ESM, the latter of which was supposed to succeed the EFSF on a long-term fund. In effect, this would double the amount of funds available. Clearly, the Eurozone realizes it’s on the cusp of financial disorder and must come up with a solution very quickly.

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