ETF/No Load Fund Tracker Newsletter For Friday, January 20, 2012

ETF/No Load Fund Tracker StatSheet




Market Commentary

Friday, January 20, 2012


After a few days of propelling ahead, markets finally took a breather with the S&P 500 barely finishing ahead at 0.07%. European indices slightly dipped while Asian indices had a strong day.

In commodities, gold is above $1,650 while oil finished below $100. Meanwhile, the Euro appreciated against the dollar this week, ending at $1.29/Euro.

And for the first time this year, the 10-year Treasury broke back above the 2% level. Although we certainly aren’t in risk off mode, it appears investors are getting the feeling that European sentiment is improving. There’s hope that Europe will pull it together, but it’s just hope.

It looks like European leaders might be making progress toward greater fiscal discipline ahead of next Monday’s meeting among EU finance ministers. With Germany leading the way, leaders are realizing that EU members must adhere to stricter guidelines to maintain a balanced budget and to reduce the overall debt load. Otherwise, they will face a financial penalty according to the proposed plan.

In Greece, officials might be getting close to a deal with bondholders that would effectively result in a 70% haircut, but would offer bondholders 30-year government debt with a higher interest rate. Unless both sides come to a consensus, the nearly $19 billion bailout payment to Greece won’t go through. Even if Greece reaches a deal next week, it’s simply buying time in my opinion.

A sign of difficult times, the IMF dropped its global growth forecast down to 3.3%. The Eurozone is expected to contract by 0.5% with Spain and Italy experiencing the strongest economic headwinds. The UK is forecast to have the highest growth, demonstrating the benefits of not being part of the Eurozone.

In the U.S., home sales picked up in December, rising 5 percent. However, home sales are still far below pre-crisis levels, showing that the housing market has a long road to recovery.

More than before, our Domestic TTI is now 3.51% above its trend line, thus supporting our decision to gain a little extra equity ETF exposure stateside.

Outside our borders, the International TTI is inching closer to its trend line at -1.47%. But we’re still staying out of international equity ETFs given unfavorable conditions in Europe that could have a greater effect on Asian and emerging economies. However, there is a good chance that I may change my mind, once the International Trend Tracking Index (TTI) has clearly pierced its trend line to the upside.

The S&P 500 has had a strong month so far, returning over 4% but next week’s Greek talks with bondholders should offer more guidance. Amidst this lower volatility, it’s a good opportunity to add selective equity ETF exposure, as we did last week, but only where upward momentum supported the decision.

Have a great week.




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

Q: Ulli: I have been following momentum on stocks and ETFs, in part by checking on the % greater than MA200. Some have reached 10% to over 20%. Do you have a rule-of-thumb on this to indicate that the stock is OVERBOUGHT?

Another parameter I have been looking at is HOW LONG the stock has been greater than MA200. Any rule-of-thumb here?

Another parameter is whether the % greater than MA200 is increasing rapidly, in particular, IF THE SLOPE HAS SUDDENLY INCREASED. Any rule-of-thumb here?

Last, I imagine that in each case above, one might need to take into account the OVERALL MARKET CONTEXT, i.e., trading range or strong bull or strong bear, and the sector context. Any rules-of- thumb here?

I am asking such a long string of questions because it seems obvious that a quick yes-or-no will not suffice.

Thanks again, as always.

A: David: No rules of thumb for any of your scenarios. I simply let the current momentum carry a fund/ETF to its eventual high point, from which a reversal will occur. If that reversal is strong enough, it will trigger my trailing sell stop and get me out of the market.

I attribute the various scenarios you posted simply to the volatility differences of a specific fund/ETF but have not seen a way to use that information in making better investment decisions.

Sorry, I can’t be of more help.



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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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