Friday, May 20, 2011


This past week’s market activity resembled the same theme as we’ve seen lately. An early sell-off followed by a recovery attempt, and then a close within a few points of the unchanged line.

While it was a volatile ride again, the bulls appeared to be frozen and can’t seem to find their bearings thereby yielding the trading floor to the bearish crowd. However, neither bulls nor bears have been making any serious headway, which means we’re stuck in no man’s land.

While first quarter earnings were strong, recent economic data were not exactly a chest pounding event keeping the markets in neutral.

Taking center stage was the European debt crisis, which seems to be on the cusp of a major event taking place. First, new words like “re-profiling” and “soft restructuring” were introduced this week intended to put some lip stick on that pig. Of course, everybody knows that over-indebted countries such as Greece, Ireland and Portugal can’t and won’t pay back the burden the ECB has put on them.

It’s just a matter of time, before the first default takes place. Second, Fitch’s downgrade of Greek debt today pushed the Euro lower against the dollar, while gold rallied sharply with the gold ETF (GLD) adding +1.26% today. Again, gold functions not as much as a hedge against inflation but against uncertainty, of which we are seeing plenty with the euro zone debt crisis. Today’s move in gold makes me wonder what that precious metal will do in terms of rallying once an actual default occurs and how much of that bullishness will affect the dollar. The problems

are not just with the countries mentioned above. As I am writing this, I am watching a live feed from Spain with huge demonstrations, which already have spilled over into Italy.

In regards to our Trend Tracking Indexes (TTIs), the picture remains murky and divided as the domestic TTI stayed about even, while its international counterpart lost. Here are the week ending numbers as they relate to the respective long-term trend lines:

Domestic TTTI: +4.41% (last week +4.58%)
International TTI: +2.59% (last week +3.31%)

Next week, we’ll be facing economic reports about New Home Sales, Durable Orders, GDP and Personal Income, just to name a few. Throw in more unexpected news from the euro zone, and you have a recipe where anything goes.

In case there are any effects on our sell stops, I will update those via a blog post. Be sure to tune in regularly.

Have a great week.



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Until next week.


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Ulli G. Niemann
Registered Investment Advisor

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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