ETF/No Load Fund Tracker Newsletter For Friday, December 16, 2011

ETF/No Load Fund Tracker StatSheet




Market Commentary

Friday, December 16, 2011


In a near repeat of yesterday, major market ETFs inched forward a smidge with the S&P 500 gaining 0.32% but losing 2.8% for the week. Although there was a glimmer of hope stateside today, European markets were marginally in the red as the Eurozone is stuck under dark skies.

Yet, the telling indicator of market sentiment lies in bond markets, where investors are in “flight to safety” mode. The 10-year Treasury fell once again to a yield of 1.85%. Although the U.S. has its fair share of problems, I strongly believe that developed market and emerging market investors will view the U.S. as a safe haven to park their money during periods of instability.

Plus, the Treasury said that Europe remains a very serious risk to the U.S. economic climate, although this realization might be a little too late as the contagion has spread from peripheral Europe to the core of Europe. And at this point, no one is immune to Europe’s deterioration.

Adding more pain to the Eurozone, Moody’s cut Belgium’s credit rating down 2 levels. On one hand, it isn’t too surprising given the country’s debt-to-GDP ratio of roughly 97%. Not to mention, it had to spend over $5 billion to bail out Dexia Bank a couple months ago.

The worst part is that this might be the start of a slippery slope where France and others might get downgraded soon. Already, Fitch issued a negative outlook for France today while putting six other nations on credit watch. And with regards to banks, 7 major financial institutions had ratings downgrades from Fitch, including Goldman Sachs, Citigroup, and Bank of America.

On American soil, we’re still waiting a resolution on the budget deficit as the countdown to another possible government shutdown begins. Washington politics are simply appalling, and the detriment to markets is frightening.

Our Domestic TTI (Trend Tracking Index) is still above its trend line at +1.55%, while the International TTI is still in the negative at -9.47%. Essentially, we’re gaining very selective but limited sector/equity ETF exposure on the domestic side while steering clear of international ETFs. In other words, our buy/sell signals haven’t really changed in the past several weeks as Europe’s woes weigh heavily on our minds.

We had a pretty rough start to the week where the Euro slid considerably, and the initial hype of the revised EU treaty appears to be withering away. In a nutshell, the current atmosphere is still very risky. Thus, I strongly suggest erring on the side of conservatism with your portfolio by maintaining a big chunk in cash or bond ETFs.

Have a great week.




All Reader Q & A’s are listed at our web site!
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A note from reader Ian:

Q: Ulli: Appreciate all you do and value your information more than any of the dozens of sites I get info from. My bond mutual funds have dropped significantly since August. These include PTTDX, FKINX and TPINX. I am looking for alternative bond ETF/ETN funds.

My dividend stock ETFs have done well for last 3 years. They are DVY, PFF, XLP and XLU. I am holding the bond funds but in looking for alternatives in ETF/ETN area; I have found nothing that compares to the dividend stock ETFs.

Am I wasting my time looking for other ETF/ETN bond type funds or just focus on the things I have that are working?

A: Ian: You have the right idea, just be sure to use my recommended trailing sell stop discipline should any of your positions go against you by too large a margin.

The markets have been on a roller coaster ride throughout 2011, as I detailed in today’s (12/10/11) post, which has made it very difficult to hold on to any positions for a longer period of time. With Europe being in upheaval, I expect that volatility to continue until their structural issues have been resolved—whenever that may be.



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About Ulli Niemann

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