ETF/No Load Fund Tracker Newsletter For Friday, December 23, 2011

ETF/No Load Fund Tracker StatSheet




Market Commentary

Friday, December 23, 2011


Amidst all the holiday cheer, the major indexes took a step away from reality and embraced the festive atmosphere. Markets worldwide generally had an uplifting day with the S&P 500 rising 0.90% while Europe indices also posted modest gains. The S&P 500 is in the green for 2011, but with one week of trading left in the year, anything can happen to send it back into the red.

The Euro barely moved against the dollar, finishing at $1.30/Euro. And apparently investors have seemed to regain some of their risk appetite as the 10-year Treasury increased to a yield of 2.03%. However, I don’t share the same sentiment about taking on more risk with the exception of a small, select number of less volatile equity/sector ETFs.

In relation to the banking system, the ECB’s liquidity efforts through long-term loans haven’t fully injected confidence for banks to take part. Eurozone banks still have over $450 billion deposited with the ECB, indicating that there’s still some fear about banks not making whole on loans.

Although Italy and Spain have both passed austerity packages, the horizon isn’t looking too sunny. Italy’s consumer confidence has hit a 16-year low, which is only another impediment for the country to get out of an economic lull.

Also, Spain has decided to offer pension increases in line with inflation. I’m not sure how Spain can eradicate its debt load if it can’t stop pandering to its socialist constituents and fail to enforce fiscal discipline. I’m afraid political favor is getting in the way of economic progress.

In the U.S., Congress finally passed a payroll cut extension, although this is miniscule in the grander scheme of things.

In economic data, durable goods orders came in at their highest in 4 months but consumer spending for November came in lower than expectations.

Our domestic TTI (Trend Tracking Index) still remains above its long-term trend line by 2.23%, as it has been barely positive for the last couple months. However, the international TTI is sufficiently in bear territory at -7.91% as the situation overseas is steeped in uncertainty.

My overall ETF outlook hasn’t changed dramatically since late October when the domestic equity ETF buy signal kicked into effect.

We’ve seen some upward movement in the last few days, which may well move into next week. But keeping in mind that Europe’s problems haven’t faded away, maintaining a strict sell stop discipline with a bond ETF bent is an appropriate strategy in our opinion. Despite the doom and gloom mood in markets, I hope you have an enjoyable holiday.





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

Q: Ulli: There has been so much talk about currency/dollar collapse and a global depression occurring very soon. Most are predicting hyper-inflation and say gold ( and a few other investments ) may be the best store of wealth, and the dollar and bonds are going to crash with most everything else.

They urge buying as much gold as you can as soon as you can. Then there are others who are predicting massive deflation. They say gold is going to crash with other commodities and the dollar is going to remain the safe haven. Large cyclical factors not the least of which is the aging baby-boom generation is driving a very long period of slow growth and deflation. Obviously, the choices one makes believing in one theory would be disastrous if the other turned out to be true.

I wonder if you agree with either or neither and have any thoughts of your own? Does your ETF strategy have the ability to prepare us for and see us through a depression? I don’t want to wait to the last minute to do something to prepare for the worst only to find out I have waited too long.

A: Mark: There are plenty of opinions; that’s for sure. It’s also a given that nobody can predict the future, so these are all wild or in some cases educated guesses. To me, it all boils down to trends. As we go forward, the simplest way to identify whether an asset class is worthwhile considering as an investment is by looking at my weekly Cutline reports, which are published every Monday morning.

They clearly identify if an ETF/mutual fund is in an uptrend or not. While that does not guarantee a successful investment outcome, it enhances your odds of being able to better evaluate as to which ETFs are rising and which ones are falling.

No matter whether we’ll have a bull market, a bear market, a recession or depression, trends tend to tell you what’s real amidst the onslaught of news and data, which always seem to cloud the clear vision.



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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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