ETF/No Load Fund Tracker Newsletter For Friday, December 14, 2012

ETF/No Load Fund Tracker StatSheet




Market Commentary

Friday, December 14, 2012


Equities ended lower Friday as the stalemate over federal budget negotiations overshadowed a rise in industrial production and upbeat economic data showing China’s manufacturing may expand at a faster pace.

The Dow industrials and the S&P 500 ended their longest weekly winning run since August despite economic data beating estimates in the US. Industrial production jumped 1.1 percent in November, the most in two years, a Federal Reserve report showed Friday, although economists attributed the better-than-expected rise in manufacturing to Hurricane Sandy.

Separately, a Commerce Department report showed consumer prices fell 0.3 percent in November while core CPI, which excludes more volatile components like food and gas, edged up 0.1 percent. The 0.3 percent drop is slightly higher than the 0.2 percent decline most economists had forecast. The numbers indicate inflation remain tame and are positive in keeping the Fed on track for further stimulus.

Investors had taken inspiration from Asia earlier in the day as December preliminary purchasing managers’ index in China rose to 50.9 from 50.5 in the prior month.

The Dow Jones Industrial Average (DJIA) trimmed 36 points to end at 13,135, down 0.2 percent for the week.

The S&P 500 Index (SPX) shed 6 points to finish at 1414, off 0.3 percent for the week, with technology lagging the most and natural resources pacing the gains among its 10 industry groups.

Treasury prices rose for the first time in four days, pushing yields lower, after a report showed consumer prices fell in November, a sign inflation is in check even as the US Fed prepared to expand its bond-purchase program. The report supports the Federal Reserve’s decision earlier this week to expand its bond buying program to boost the economy. The central bank said they’d be comfortable with inflation rising toward 2.5 percent.

European stocks sent out mixed signals on Friday as investors watched US lawmakers debate a new budget agreement while weighing data that showed China’s manufacturing improved further in December. The pan-European Stoxx Europe 600 index fell less than 0.1 percent in London, but gained 0.1 percent for the week.

The DAX 30 index finished 0.2 percent higher, up 1.1 percent for the week.

The CAC 40 index finished marginally higher in Paris despite French oil major Total SA losing 0.7 percent. The index is higher one percent over last Friday’s close.

In the ETF space, China-linked funds found favor with investors after December manufacturing report came in better than the expected. The SPDR S&P China ETF (GXC), which has an AUM of more than $980 million, rose 1.33 percent on the day.

Oil funds also jumped as oil futures rallied after reports showed China manufacturing PMI rose to a 14-month high in December. The United States Oil Fund (OIL) with assets of more than $420 million rose 0.78 percent for the day.

Our Trend Tracking Indexes (TTIs) again moved separate ways as the Domestic one retreated and the International one gained. Here’s how we ended up:

Domestic TTI: +1.38% (last week +1.78%)

International TTI: +6.52% (last week +5.60%)

Next week, all eyes will be on the fiscal cliff negotiations, which at this point look as if they will fail, a fact that has not been priced in the current level of the equity indexes. We will soon find out if politicians’ respond more “favorably” should the markets (via a sell-off)  force the parties back to the negotiation table.

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 Lou:

Q: Ulli: What is the significance of the 200 day M/A moving over the 50 day M/A?

A: Lou: You probably meant it the other way around; when the 50 day M/A crosses the 200 day M/A…

That is an old trend following signal that some investors use. If the crossing is to the upside, it is referred to as the ‘Golden Cross;’ if it’s to the downside, it is called the ‘Death Cross.’

Since both indicators are moving averages, the signals happen with quite some delay within a major trend. It’s considered the final confirmation that a bull market is in full force (Golden Cross) or that a bear market is upon us (Death Cross).

Personally, I think these signals get you in the market too late and out of them also only after a severe market retreat, which is why I don’t use 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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