ETF/No Load Fund Tracker StatSheet
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Friday, August 24, 2012
A ROLLER COASTER: NOW FED STIMULUS HOPES ARE BACK ON; EUROPE ENDS WINNING STREAK
US equities fought back after a four-session slide ending the week on a high as hopes for monetary expansion received a boost after Fed chairman Bernanke said the central bank has more tools in its kitty to stimulate economic activity.
Remember, there was no promise of any QE but merely the mention that additional ammunition allegedly resides in the Fed’s toolkit. We’ve seen that all month as sentiment swung between “will” or “won’t” there be more stimulus, and markets simply reacted to those words when found in headline news. As a result, the Fed may never have to actually do anything but simply utter the word that Wall Street clamors.
The Dow Jones Industrial Average (DJIA) surged 0.8 percent, still off 0.7 percent for the week. Breadth within the blue-chip index turned positive after four down days with only four of its 30 components finishing lower. The S&P 500 Index (SPX) rose 0.7 percent, down 0.5 percent for the week while the NASDAQ Composite (COMP) added 0.5 percent, down 0.2 percent over last Friday.
Treasuries advanced after a four-week slide to finish the week higher despite prices falling on the day as worries over the European debt crisis weighed on investors.
The dollar index, a barometer of the greenback’s strength against a basket of six leading currencies, rose to 81.625 from 81.368 in late trading Thursday. The euro declined Friday after a report suggested the ECB won’t announce its much discussed bond buying program on September 6 as widely anticipated, but would rather wait for the German court ruling on leveraging the region’s bailout fund (ESM) later in September.
Meanwhile, German chancellor Angela Merkel proved Athens’ critics wrong after announcing Berlin will back Greece in its effort to overhaul the economy. Underlining that the conditions for Greece’s international bailout remain in place, Merkel, in an apparent rebuke to her own party-men and other critics who advocated Greece’s exit from the currency zone, said she remained committed to Greece’s continuation in the euro, adding the strict austerity measures are meant to help Athens reach ‘light at the end of the tunnel.’
Well, to my way of thinking, she will not be able to put further taxpayers’ money at risk without severe political backlash as this alleged light at the end of the tunnel may very well turn into an oncoming train.
European stocks closed higher for the day, driven by a late-session rally even though indexes were off last Friday’s high, snapping an 11-week winning streak. The Stoxx Europe 600 index climbed 0.1 percent after trading in the negative territory most of the day. The pan-European index finished 1.8 percent lower on the week.
However, Germany’s DAX 30 index rose 0.3 percent on the day while in Paris the CAC 40 index managed a slight gain. However, both the DAX 30 and the CAC 40 are down 1 percent and 1.6 percent on the week, respectively.
In the ETF space, the Van Eck Market Vectors Vietnam ETF (VNM) bounced back strongly after yesterday’s steep decline, adding 3.29 percent on the day. The Teucrium Natural Gas Fund (NAGS) slumped 2.75 percent after Thursday’s better-than-expected inventory report put downward pressure on natural gas.
Our Trend Tracking Indexes (TTIs) meandered with the major indexes and, as posted, the International TTI generated a new ‘Buy’ signal effective with the close of the market on 8/21/12.
Here’s how we ended the week:
Domestic TTI: +2.95% (last week +3.05%)
International TTI: +1.69% (last week +2.34%)
Have a great week.
Disclosure: No holdings
READER Q & A FOR THE WEEK
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A note from reader Rett:
Q: Ulli: Have you ever regressed your historical TTI signals to the gain or loss of the S&P 500 over the following 6 months?
In other words, have you been able to say, for example, that “The S&P should gain 5% over the next 6 months, plus or minus 3%, based on the current position of the “TTI”?
A: Rett: No, I have never used the TTI as a forecasting tool. It’s simply designed to let us determine the major direction of the market, so that we don’t go “long” when this indicator slips into bear market territory.
In other words, in order to grow/preserve capital and to control downside risk, we need to be in sync with the major trend and neither against it nor make any wild guesses as to what “should” happen in the markets.
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