I’ll be in planes and taxis for most of Monday and will not have a chance to write any blog posts or produce Tuesday’s ‘Mutual Funds on the Cutline’ report.
Regular posting will resume Tuesday afternoon PST with that day’s market commentary.
ETF Master Cutline List – Updated Through 8/19/2011
Following the theme of continued flight to safety, this week’s ETF Cutline report confirms what the Leaders and Laggards table showed last Saturday: Precious metals and bonds of all durations reign supreme as we slipped further into bear market territory.
Only 39 ETFs are positioned above the cutline, while 353 hover below it. No equity ETFs are showing positive momentum figures; even the always reliable Consumer Staples (XLP) have dropped to the -8 spot.
If bonds are of interest to you, take a look above the cutline as there are several candidates that deserve further consideration. Be sure to drop down a few notches from the top listing, since some bond ETFs have crossed their trend lines to the upside by a significant margin.
Here’s the latest report:
Last Week In Review: ETF News And Blog Posts To 8/21/2011
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 8/21/2011.
The S&P 500’s prior week’s loss of -1.7% now sounds like minor event as bearish forces gathered momentum and pushed this benchmark index down another -4.66% during the past five trading days despite Monday’s sharp rebound.
My global view has not changed, and I believe that these wide market swings are far from being over, although we could see a short rest period before the European debt crisis shifts into the next gear.
In any event, if you followed my sell stops rules, you should not have any equity exposure at this time with the possible exception of a couple of sector/country ETFs, or hedged positions.
This week, we covered the following:
Buy-And-Hold Investing Is Dead
To me, buy-and-hold investing has been dead for decades, although there were temporary periods where it did well, as investment manager Barry Ritholtz explains in “Buy-and-Hold is dead; cash is king:”
To a generation of investors raised to believe in the power of owning stocks for the long run, Barry Ritholtz has a characteristically blunt message: Buy-and-hold investing is dead.
The classic investing strategy that worked wonderfully through the 1980s and 1990s has been losing potency over the past decade, Ritholtz points out, but old beliefs die hard. Yet die they must — if an investor hopes to weather the current stormy market climate and even take advantage of it.
Ritholtz, an investment manager, is chief executive of FusionIQ, a quantitative research firm, and also runs a popular blog about markets and investing called The Big Picture. The way he sees it, stock investors need to bury the past — and quickly.
“The time for buy and hold is during a secular bull market, like from 1982 to 2000,” Ritholtz said. “When you’re in a secular bear market, which we are in, I think of investors’ jobs as managing risk and preserving capital.”
ETF Leaders And Laggards – For The Week Ending 8/19/2011
Here is a quick ETF review of the past week’s winners and losers from my High Volume ETF Master list:
Equity ETFs got bruised again last week, as the S&P 500 lost -4.66% over the past 5 trading days.
Again, the flight to safety was on; the top 3 ETF leaders remained the same but changed positions slightly. With continued market weakness supported by a global economic slowdown, the DJ Transportation ETF (IYT) confirmed that trend as the 4th worst performer on my list.
With the European crisis heating up, amongst widespread jawboning with no concrete solution, it’s interesting to note that the country representing Europe’s top economic engine, (EWG) implied to bail everyone else out, has its own economic problems as its last GDP number indicated hardly any growth.
As a result, it’s no surprise that EWG is the 3rd worst performer on the list, which does not bode well for throwing an assist to those countries in need of financial assistance.
To me, it simply means that trouble is brewing on the horizon, I just don’t know yet if Europe’s top can-kickers will be successful one more time by postponing the unavoidable (default) again.
Disclosure: Holdings in GLD, TLT
08-19-2011
ETF/No Load Fund Tracker Newsletter For Friday, August 19, 2011
ETF/No Load Fund Tracker StatSheet
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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:
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Market Commentary
Friday, August 19, 2011
FORECLOSING ON EQUITIES
The bullish start to this week has long been forgotten, as the major market ETFs got clobbered at the tune of -4.66% for the S&P 500. For the month, this widely followed index is now down by a mind boggling -13.00%, while our core holding, PRPFX, managed to slip only by a scant -1.43%.
Recession fears gripped Wall Street, and rightfully so, as stocks plunged sharply on Thursday, which was followed up by more bearish superiority on Friday. Domestic economic data showed a stalling economy, not just here but in Europe’s main engine, Germany, as well. The debt crisis is far from being contained and worries persist that primarily European banks will be adversely affected once the first domino starts to tumble.
Our Domestic Trend Tracking Indexes (TTIs) slithered further south and have reached the following positions below their long-term trend lines:
Domestic TTI: -0.99% (last week +0.82%)
International TTI: -12.33% (last week -9.27%)
This dip further into bear market territory supported our PRPFX hedge, which shows the following result after today’s close:
So far, PRPFX has held up nicely on its own without any help from the short position SH. Should the markets continue the current path south, the odds of which I consider far better than 50/50, you will see SH’s performance kicking up a notch and lending an assist once PRPFX starts to slip.
While next week’s economic calendar is filled with reports about New Home Sales, Durable Orders, Initial Claims and the all important GDP, it will be the European debt crisis, which will take center stage. I expect some dramatic negative event to surface all of a sudden, which will have more negative consequences for those hanging on to equities. That is not a prediction, because I am not sure of the timing, but merely my opinion based on how I currently view the global landscape.
The best advice I can give during these times is for you to stay out of the market or in hedged positions. Outright longs and shorts can get killed very easily by extreme volatility.
Remember, right now, capital preservation should be your priority number one.
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 Rahul:
Q: Ulli: I regularly visit theetfbully.com for your market analysis and insight. Last Wednesday, I saw your posting about 7 model portfolios. If I want to invest some money today, which model portfolio I should follow? I have some holding in PRPFX. My goal is to preserve capital as far as possible and to position for 7-10% gain yearly.
I appreciate your guidance.
A: Rahul: You should not invest in a new portfolio at this time. Wait till our domestic TTI signals a buy again. Right now, we’re sliding into bear market territory and have our #1 portfolio hedged as shown.
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