ETF/No Load Fund Tracker Newsletter For Friday, February 3, 2012

ETF/No Load Fund Tracker StatSheet




Market Commentary

Friday, February 3, 2012


Markets continued their upward trajectory, pushing more into bull territory. The S&P 500 jumped 1.46% while the NASDAQ rose 1.61% to hit its highest level since December 2000. The optimism was also shared by European and Asian indices.

More evidence of pendulum behavior in Treasury yields, the 10-year Treasury shot up to 1.95%. Like I’ve said before, although volatility has largely been absent lately, we are in a relatively risky investment environment considering what’s going on in Europe.

In the major news of the day, U.S. unemployment fell to 8.3% in January, the lowest level since February 2009. Nevertheless, there was a decrease in labor force participation, although the Bureau of Labor Statistics says that this is due to population growth among the elderly and young who have lower rates of labor force participation (see page 6 of this). While there’s still a long way to go on the employment front, it’s definitely an encouraging sign.

On the international stage, it looks like Greece might be coming to a close on talks with its creditors. Nonetheless, labor reform is the contentious issue as various parties are putting pressure on Greece to institute wage and pension cuts.

To make things worse, debt inspectors say that Greece may require additional funds on the order of roughly $20 billion just to bring its debt-to GDP ratio down to 120%. As the clock ticks for Greece to obtain approval for a second bailout package, I can only wonder if the Greeks will agree to a new deal, and if so, whether it can get itself back on the financial straight and narrow or end up being debt slaves to the European banks forever.

A sign that economic weakness in the Eurozone persists, December retail sales were down 0.4% in the region despite the fact that it was the holiday season. Markets might be responding positively at the moment, but the real economy continues to suffer.

While our Domestic TTI remains in positive territory by a solid +5.21%, the International TTI finally broke above its trend line by +2.48%. While the International TTI is now positive, I’m not yet comfortable issuing a buy signal for international ETFs, as I want to see a little more stability over the coming few trading days.

The picture is still gloomy internationally and not much better in the U.S. But given recent trends, we have to participate on some of this upside while being prepared for a negative shock by using our trailing stop loss points.

Have a great week.




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

Q: Ulli: I am sitting with a nice profit with VEU and VNQ. 8-10% range. With the market widely fluctuating, at what point would one consider taking profits and buying back later?

I hate to see this disappear by having a 7% trailing stop should the market go down. I realize there may not be a perfect answer to this. Thanks for the excellent site.

A: Don: You are right, there is no perfect answer. My preference is to use trailing sell stops as my signal when to take profits or limit losses, whichever case it may be. If you’re happy with your current gains and are worried about giving them back, simply take them.



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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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