ETF/No Load Fund Tracker Newsletter For Friday, May 11, 2012

ETF/No Load Fund Tracker StatSheet




Market Commentary

Friday, May 11, 2012


US stocks finished the week lower for the second consecutive week on Friday as banking giant JPMorgan Chase announced an unexpected $2-billion trading loss, sending investors running for cover. I still stick to my comment from yesterday that there is never just one cockroach, and we’ll have to wait and see if others appear as time goes on.

A Labor Department report showing producer prices dropped 0.2 percent in April, with core prices excluding energy and food rising 0.2 percent did little to ease investor fear. In a longest stretch of gains since 1998, Treasuries rose for the eighth week in a row as the Greece political circus continued, spiking demand for US safe-haven assets as risk appetite diminished. A four-year high reading of a key consumer confidence index in May did precious little to calm nerves.

The Dow Jones Industrial Average (DJIA) slipped 34 points to finish the week at 12,820.60, JP Morgan Chase (JPM), the index’s heaviest component posted a sharp 9.3 percent decline.

The S&P 500 Index (SPX) shed 4.60 points to settle at 1353.39, off 1.2 percent over last week, with. Financials are faring the worst among the 10 industry groups.

The NASDAQ Composite Index (COMP) climbed up fractionally to close at 2933.82, off 0.8 percent over last Friday.

Wall Street’s biggest bank (by balance sheet) JP Morgan Chase’s surprise loss drove the benchmark 10-year bonds higher for the eighth straight week, with yields dropping three basis points to 1.84 percent. Yields on 30-year bonds dropped 0.03 percentage points to close the week at 3.01 percent.

ETFs in the news:

Among the day’s top gainers, the MSCI Emerging Markets EMEA Index Fund (EEME) came out tops. This fund tracks the MSCI Emerging Markets EMEA Index, which in turn is designed to measure the performance of equity securities in emerging countries in Europe, Africa and the Middle East; it added 2.11 percent.

The S&P 500 VIX Short-Term Futures ETN (VXX) remained among the day’s top winners, as indexes swung wildly between gains and losses before settling in the green. Despite today’s gain, the fund is down 48 percent since the beginning of 2012. This ETF is not for the faint hearted and discretion is required.

As the financial sector slipped on JP Morgan’s loss news, the iShares Dow Jones US Financial Services Index Fund (IYG) dropped 1.48 percent. JP Morgan blamed the surprise loss to sour trades, leaving investors worried over similar losses from other banks. This ETF will be an interesting watch as the banking-sector story slowly unfolds.

Our Trend Tracking Indexes (TTIs) slipped as well, with the domestic one remaining above the line. The International TTI has been hugging its trend line on both sides but eased below it by a small margin.

Here are this week’s closing numbers:

Domestic TTI: +3.26% (last week +3.99%)

International TTI: -0.18% (last week +1.53%)

As I posted yesterday, I will wait with issuing a ‘Sell’ signal until the International TTI clearly drops into bearish territory and remains there for a few trading days.

Have a great week.


Disclosure: No holdings



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

Q: Ulli: Recently, you sold VEU after it had dropped 7% from its high, but in the model portfolios you still hold DBC, when it’s lost more than 9%. Care to share your reasoning?

A: Sam: Sure; remember, different asset classes have different sell stop points. For broadly diversified domestic and international funds/ETFs, I use 7%.

For more volatile sector/country funds/ETFs, I use 10% and for bond ETFs, I use 5%. DBC falls in the sector fund classification.



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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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