ETF/No Load Fund Tracker Newsletter For Friday, September 14, 2012
ETF/No Load Fund Tracker StatSheet
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Friday, September 14, 2012
MAJOR INDEXES FINISH WEEK HIGHER ON FED STIMULUS; EUROPE RALLIES TO 15-MONTH HIGH
US equities capped gains Friday to extend its winning ways for the second week in a row that pushed the three indexes to multi-year highs as investors sought refuge in riskier but higher yield assets over worries the latest stimulus from the Federal Reserve will spur inflation.
After rising as much as 113 points, the Dow Jones Industrial Average (DJIA) settled 54 points higher at 13,593, up 2.15 percent on the week while the S&P 500 Index (SPX) added 6 points to settle at 1466 with energy outperforming among its 10 business groups.
Treasury prices tumbled Friday, pushing yields on 10-year securities the highest in six months while the yield on 30-year Treasury bond surged the most in a week in three years as the as investors dumped safe havens over concerns the Fed’s latest move will accelerate inflation.
The USD lost further ground Friday, erasing its gains for 2012 as the Federal Reserve’s stimulus plan was seen as dollar-negative in the short-run. The dollar index, a gauge that measures the greenback against a basket of six global currencies, dropped to 78.864 from 79.254 on Thursday, the least since May. The index has shed 1.7 percent for the week while the euro gained 2.4 percent over the same period.
The big question in your mind is probably what the implications of an open-ended QE program by the Fed are. For an interesting and candid interview, here is Ex-Fed governor Kevin Warsh on the Fed’s “all-in” move:
Meanwhile, stocks in Europe rallied Friday following the FOMC announcement on Thursday, settling at a 15-month high. The pan-European Stoxx Europe 600 index leapt 1.3 percent on the day with risk-sensitive sectors like banks and miners pacing the gainers.
In Germany, the DAX 30 index rose 1.3 percent Friday, up 2.7 percent for the week. The FTSE 100 rose 1.6 percent for the day, propelled by gains in the banking and energy sector. The London index added 2.1 percent on the week.
In the ETF space, basic and precious metals-linked funds surged as investors rushed to buy the yellow metal to hedge against inflation. The Market Vectors Gold Miners ETF (GDX) and the Market Vectors Junior Gold Miners ETF (GDXJ) were among the biggest percentage gainers, adding 2.55 percent and 2.62 percent, respectively.
The SPDR S&P Homebuilders ETF (XHB) jumped 2.25 percent while the iShares Dow Jones US Home Construction Index Fund (ITB) rose 2.54 percent after shares of homebuilders, including PulteGroup, Hovnanian Enterprises and Toll Brothers continued to rise following the Fed’s mortgage buying news yesterday.
In a surprise move, the so-called fear-tracking CBOE volatility index (VIX) jumped 3.27 percent. VIX typically moves in opposite direction to the market, which could very well indicate a temporary upcoming trend reversal.
Our Trend Tracking Indexes (TTIs) rallied higher with the indexes, but the international TTI, which is far more volatile, really took off as the closing numbers indicate.
Here’s how we ended this week:
Domestic TTI: +3.80% (last week +3.75%)
International TTI: +6.24% (last week +3.67%)
Have a great week.
Disclosure: No holdings
READER Q & A FOR THE WEEK
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A note from reader Joe:
Q: Ulli: Recent news from Porter Stansburry, Addison Wiggins, and others suggest the USA’s Dollar is about to see rapid degradation in value, and it going to lose its place as the worlds reserve currency? If this posture is valid, what moves need be made to preserve or grow wealth?
A: Joe: While that maybe a possibility in the future, I don’t see this as an issue right now. The dollar, as represented by UUP, is in bullish territory as the flight to safety out of Europe continues.
We need to wait until that trend reverses to make an informed decision as to what other asset classes maybe heading north at that time. Trying to predetermine any potential outcomes right now is simply a gamble since there are way too many variables that could influence market direction.
Wait for the trend to give you a better picture.
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