ETF/No Load Fund Tracker Newsletter For Friday, October 21, 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/2011/10/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-10202011/

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Market Commentary

Friday, October 21, 2011

SHATTERING THE GLASS CEILING—IS THE BREAKOUT FOR REAL?

After a turbulent week, markets ended on a cheery note as the S&P 500 gained 1.88%. The index traded between 1,190 and 1,240 for the week, going on a bit of a rollercoaster to say the least. Meanwhile, oil and gold went up 1.70% and 1.74%, respectively.

In a week where the VIX swung up and down over 9% for four out of five days, we are back into risk mode. The continued uncertainty, especially from Europe, makes an entry point for equities difficult in the current environment.

Strong corporate earnings brought some upside to equities in the U.S., but the same can’t be said on the other side of the Pacific. China’s Shanghai Composite Index had its worst week in five months after concerns about an economic slowdown adversely impacted markets, especially the below expected third quarter GDP announced earlier this week.

Weakness on the commodity and energy front as well as monetary tightening is creating some headwinds for the Chinese economy that will be closely watched over the next few months. Yet, most eyes are still on Europe.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 10/20/2011

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ETF/Mutual Fund Data updated through Thursday, October 20, 2011

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

 

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: SELL — since 8/9/2011

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. I will not issue a new Buy signal until this index has clearly pierced the trend line to the upside and has remained there.

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Markets Cool Off a Bit, But Equity ETFs Are Still in the Hot Seat

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[Chart courtesy of MarketWatch.com]

After three days of large swings, markets tempered a bit to say the least. Volatility heavily subsided as the VIX rose 1.28%. As far as market performance, the S&P 500 posted a modest gain of 0.46% while trading with a relatively narrow 20 point band. In an otherwise relatively quiet day, gold took a bit of a dip, dropping 2.25%. Europe is still our primary focus in trying to determine market direction.

Although Greece has taken some arguably positive short-term steps to prevent default by passing austerity measures, Europe’s fate hasn’t gotten any more certain. The French and Germans remain divided over how to go forward with the EFSF expansion in terms of how much each country should contribute. More fundamentally, there is no consensus as to how the funds should be raised, leaving the plan in limbo. But there is some hope that Europe is taking some steps in the right direction.

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The Long-Term Outlook Still Looks Questionable for Equity ETFs

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[Chart courtesy of MarketWatch.com]

In what has so far been a topsy-turvy week on Wall Street, the markets backtracked into the red after Tuesday’s gains. While the Dow was marginally affected, dropping 0.63%, the S&P 500 and NASDAQ respectively fell 1.26% and 2.01%. It’s quite a disparity among the three major indices indeed. Meanwhile, oil dipped 2.60% to 86.04/barrel.

With regards to the U.S. economic outlook, the recent Beige Book report from the Fed highlighted some improvement in consumer spending as well as manufacturing. However, lower business investment, as shown by lower loan activity, as well as persistent high unemployment, continue to be a crutch for the economy, a sentiment expressed by falling markets today.

Weak economic data and mixed corporate earnings show few signs of improvement in the U.S. Yet, the extent of Europe’s progress with the debt crisis still remains an unanswered question as well.

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7 ETF Model Portfolios You Can Use – Updated through 10/18/2011

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Riding the hopes of a European debt solution pushed the major market ETFs to the upper end of the trading range. While domestic equity ETFs still remain on the bearish side of the trend line, some sector ETFs have crossed to the upside and are offering opportunities for gaining limited exposure.

Yesterday, I took advantage of early weakness to add XLP to clients’ portfolios as well as to some of our ETF Models. There are a couple other possibilities I have my eye on. Another strong push may very well be the one that confirms an upside breakout and brings domestic equities into play again.

Take a look at the latest numbers:

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This Market Turbulence is Mind Boggling for ETFs

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[Chart courtesy of MarketWatch.com]

Just when it seemed like markets came to reality and began taking Europe’s problems into account again, equities shot up, with the S&P 500 rising 2.04% while volatility subsided.  The amount of sensitivity to news in the marketplace is borderline insane at the moment. I simply can’t deviate from our strategy yet, unless a viable long-term trend develops; at least for equity ETFs.

The big news of the day was an announcement from France and Germany that the EFSF would be roughly quadrupled to $2 trillion. Yet, the spread between the French 10-year bond and the German bund hit its highest since 1992 at 114 basis points. The expansion is a crucial step to address Eurozone debt, but does it mean we have a long-term solution?

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