ETF/No Load Fund Tracker StatSheet
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Friday, April 12, 2013
NEGATIVE EARNINGS AND ECONOMIC DATA DISRUPT WALL STREET RUN
The four day winning streak ended today as stocks succumbed across major averages. The S&P 500 led the way, falling 0.3%; the Nasdaq lost 0.2% and the Dow Jones industrial average closed fractionally lower.
Disappointing consumer data led the way. Retail sales in the U.S. dropped in March by the most in nine months. According to Commerce Department, purchases fell 0.4 percent, the biggest setback since June, after jumping 1 percent in February. The number is pointing to a slowdown in consumer spending as the first quarter drew to a close. Economists were prompted to trim consumer spending forecasts from what could be the best quarter in two years. Gains in hiring and wages will be needed to ensure any slowdown proves temporary as federal budget cuts and an increase in the payroll tax restrain the expansion.
Financial stocks were pressured on Friday by a pair of disappointing bank results and a delay in closing a large bank deal. All eyes were on JPMorgan (JPM) and Wells Fargo (WFC) today after both reported earnings ahead of the opening bell. Wells Fargo’s revenue came up short by $300 million at $21.3 billion. Shares of Wells dropped 0.8 percent while JPMorgan was off 0.6 percent.
At the New York Mercantile Exchange, metals and energy sank. Gold futures plunged as much as 5.3 percent to trade below $1,500 for the first time since 2011 and have now entered the bear market amid speculation Cyprus will sell reserves to raise cash. May oil settled at $91.29 a barrel, down 2.4%. A slump in materials has extended, marching to what could be the “death bell” (according to Citigroup) after the four-year rally.
It has been a spectacular week in the market where almost new records were formed every trading day. The Nasdaq rose 2.8%; the S&P 500 added 2.3%. It was the best weekly gain for both since the first week of the year. The Dow jumped 2.1%.
The Fed’s unprecedented bond purchases and three straight years of profit growth pushed the S&P 500 up almost 136 percent from its bear-market low in 2009. According to Goldman Sachs Group Inc. data, many of S&P 500 stocks with the most bearish bets rose 4.8 percent this week.
Is a correction going to happen next week or is the bull going to keep running? Is this the end of a nice run or the beginning of something big?
While no one has the answer to these questions, at least as trend followers we are not that concerned about needing to find one. Our low volatility equity ETF positions are in place and performing well; their sell stops have been identified and will be executed should the need arise.
That fact alone lets us sleep well at night.
In the meantime, our Trend Tracking Indexes (TTIs) went further into bullish mode, as the major indexes continued their march north.
For the week, we closed as follows:
Domestic TTI: +4.03% (last week +3.16%)
International TTI: +7.97% (last week +5.93%)
Have a great week.
READER Q & A FOR THE WEEK
All Reader Q & A’s are listed at our web site!
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A note from reader Doug:
Q: Ulli: I read in your material that you have exited some bond ETF positions because of sell signals in that area. Did that activity supersede the 7% stop that you had on those bond positions? In other words, did something other than the 7% decline in share price cause you to exit the positions? If so, what was it?
A: Doug: For bond ETFs, I use a 5% trailing stop loss, but overriding was the fact that some of our holdings BND, TIP, TLH had not only broken below their long term trend lines but were showing poor performance. While some did recover, I found better opportunities elsewhere, like in low volatility equity ETFs.
Again, in regards to stop losses, for broadly diversified domestic/international funds/ETFs, I use 7%, for bonds, I use 5% and for sector and country ETFs, I use 10%.
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