ETF/No Load Fund Tracker Newsletter For Friday, October 12, 2012

ETF/No Load Fund Tracker StatSheet





Market Commentary

Friday, October 12, 2012


US equities closed mostly lower Friday capping off their worst week in four months as worries over Europe offset early optimism over a surprise rise in consumer confidence.

Risk sentiment had improved earlier after the Michigan University/Reuters Consumer Sentiment Index jumped to a five-year high of 83.1 in October. The relief however, proved fleeting after a Labor Department report revealed the producer price index rose 1.1 percent in September, beating estimates and stoking worries of inflation. Government officials attributed the spike to a rise in energy and food prices.

Giving up a 75-point rise during the session, the Dow Jones Industrial Average (DJIA) managed to add only 2 points on the day, off 2.1 percent for the week; the blue-chip index witnessed its biggest weekly decline since June 1.

Not to be outdone, the S&P 500 Index (SPX) shed 4 points for the day, down 2.2 percent over last Friday with financials faring the worst and consumer staples pacing gains among its 10 business groups.

Treasuries gained for the fourth straight day as demand for safe haven assets spiked following a report in the International Financing Review that suggested the European Stability Mechanism is ill-prepared to rescue Spain if the country were to need help before the end of the year.

Yield on the benchmark 10-year Treasury notes fell one basis point to 1.66 percent while 30-year Treasury bond yield fell two basis points to 2.83 percent.

Meanwhile, the US dollar lost ground while the euro found modest support amid speculations over an imminent bailout request by Spain. The ICE dollar index, a gauge of the greenback’s relative strength against a basket of six currencies, slipped to 79.677 from 79.781.

Across Atlantic, the Stoxx Europe 600 index trimmed losses in late afternoon action after a surprise jump in US consumer confidence in October. The mood was also lifted after European industrial production data revealed a 0.6 percent expansion in August, indicating the region’s GDP did not contract as sharply as the more downbeat recent surveys suggest. Off 0.5 percent for the day, the pan-European benchmark is lower 1.7 percent over last Friday.

The German DAX 30 index ended 0.7 percent lower after index component Siemens AG dropped 1.1 percent on the day. Societe Generale cut the conglomerate’s rating to hold from buy.

Banks rallied across Europe with shares of Standard Chartered Plc and Lloyds Banking Group Plc rising 2.3 percent in London. The FTSE 100 index however tumbled 0.6 percent as oil stocks edged lower.

In the ETF space, financials-linked funds underperformed as investors’ worry over diminishing profit margins came to the forefront. Despite the bellwethers JP Morgan and Wells Fargo beating earnings estimates, the SPDR S&P Regional Banking ETF (KRE) emerged one of the worst performers for the day, tumbling 3.13 percent for the day. The State Street Financial Select Sector SPDR ETF (XLF) also tracked lower, trimming 1.37 percent for the day.

The Fed’s QE effects way have worn off, but who really were the beneficiaries of that effort other than temporary market rallies? In this week’s cartoon video, the ‘Bears’ explain in simple language who has benefitted from the bailouts and the various QE programs. Hat tip to ZeroHedge for this gem:


Our Trend Tracking Indexes (TTIs) retreated in the face of lost upward momentum, but at this point they are maintaining their position on the bullish side of the trend line:

Domestic TTI: +2.23% (last week +3.29%)

International TTI: +2.51% (last week +4.07%)

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 John:

Q: Ulli: I have a brokerage acct. with Fidelity holding ETF’s and some stocks. I also have some Mutual Funds as well.

With the TTI in the ‘buy’, would it be advisable to have some bonds or bond funds at this point? I do have about 30% in the Money Market and Cash Reserves.

I’m curious what you think of bonds in these “interesting” times?

A: John: Yes, I have owned a variety of bonds all year, as shown in my model portfolios.

They have balanced out market fluctuations quite well, and I consider them an important portion of any portfolio during these uncertain times. Nevertheless, I still advocate using a 5% trailing sell stop on all bond ETF holdings just in case interest rates suddenly head the other way.



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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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