ETF/No Load Fund Tracker StatSheet
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Friday, July 29, 2011
HOW LOW CAN YOU GO?
The major market ETFs took it on the chin this week, as continued indecision and confusion about the debt ceiling debacle put traders in a selling mood.
It was straight downhill for five days in a row, which brings up the question as to where support might kick in to stop the bleeding. As far as the S&P 500 is concerned, we have broken through the 50-day moving average by -1.47% and are honing in on the index’s 200-day moving average, which stands at 1,281. Actually, we came close to that level today, and it acted as springboard.
Whether this number will hold is wide open and will depend on further economic news along with a solution to the debt ceiling issue. Obviously, this has been the most talked about topic, and questions abound as to what will happen if the government actually defaults.
While there are more questions than answers, you might want to review one man’s opinion in Not Raising the Debt Ceiling Would be a Blessing, by Mish of Global Economic Trends.
Today’s dismal close came on the heels of the latest economic uppercut, as it was reported that the U.S. economy barely grew and past GDP estimates were severely reduced.
As a reader of this blog, that announcement should not have come as a surprise, as I have been harping on the fact for almost 2 years that there was no economic recovery; it was all a stimulus induced mirage. In the end, nothing was accomplished other than that we owe a few trillion dollars more, but who is counting…
For the week, the S&P 500 gave back 3.9%, while the Dow dropped 4.2% and Nasdaq surrendered 3.58%. For the month, the S&P lost 2.2%.
I have been talking about these times of uncertainty for a couple of year now, and how portfolio adjustments, along with a disciplined exit strategy, are necessary for survival. For example, I have been a loud proponent of investing in the Permanent Portfolio fund (PRPFX) as a core holding, which has turned out to be the right decision so far.
For the past week, PRPFX lost a modest 0.5% while, for the month, it actually gained 2.88%, giving us the portfolio stability I was looking for. That is a big difference to the S&P’s 2.2% loss.
Our Trend Tracking Indexes (TTIs) continue to offer a mixed picture, as the domestic TTI remains in bullish territory, while its international cousin has sunk a little further below its trend line into the bearish camp. Here are today’s closing numbers:
Domestic TTI: +3.04% (last week +4.70%)
International TTI: -1.17% (last week +0.91%)
Next week, more earnings and economic reports will take a back seat to the continued debt ceiling circus. Any resolution is bound to cause a euphoric reaction on Wall Street. On the other hand, if negative sentiment prevails and a solution is not found, we may very well test and break through the psychologically important 200-day moving average on the S&P 500.
My suggestion is the same as always: Be prepared for either scenario, watch your sell stops and execute them when necessary.
Have a great week.
READER Q & A FOR THE WEEK
All Reader Q & A’s are listed at our web site!
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A note from reader Al:
Q: Ulli: I hope all goes well for you, and I continue to enjoy your newsletter and good perspective and advice.
You may have already seen the latest assessment of the debt/credit mess in Europe, and by necessity…the US; I hope it doesn’t spoil your lunch.
I hope to be a bit wiser with fund allocation, should things go from bad to worse…or worser?
A: Al: There is no reason to worry about things you can’t control. Just make sure you have an exit strategy in place, and your investing life will be much easier.
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