ETF/No Load Fund Tracker Newsletter For Friday, October 18, 2013

ETF/No Load Fund Tracker StatSheet





Market Commentary

Friday, October 18, 2013


Domestic equity markets were solidly higher to end the week with the S&P hitting a fresh record high, as better-than-expected earnings results from Google, Morgan Stanley, and General Electric overshadowed Honeywell’s quarterly revenue missing expectations.

Elsewhere, a plethora of upbeat Chinese economic data helped to buoy sentiment, highlighted by the first acceleration in GDP growth in three quarters. The Dow Jones Industrial Average closed 27 points higher (0.2%) at 15,399, the S&P 500 Index registered its third consecutive gain, rising 11 points (0.7%) to 1,744, and the Nasdaq Composite increased 51 points (1.3%) to 3,914.

Google made a significant contribution to the relative strength of the tech-heavy index. Shares of Google surged 13.8% after the company surpassed earnings expectations by 37 cents. Thanks to Google’s surge, the tech sector settled in the lead with a gain of 1.8%. Even though the sector ended sharply higher, some other top members underperformed. Qualcomm shed 0.4% and IBM fell 0.6% after plunging 6.4% yesterday. Outside of technology, the industrial sector (+1.1%) was the only group that ended with a gain larger than 1.0%.

Top sector component General Electric jumped 3.5% after beating earnings expectations on a 1.5% year-over-year decline in revenue. Transports also contributed to the sector’s strength as the Dow Jones Transportation Average advanced 1.2%.

Elsewhere, the energy space (+0.9%) outperformed. Also of note, the financial sector (+0.3%) underperformed even as Morgan Stanley rose 2.6% after beating on earnings and revenue. JPMorgan Chase received a late-afternoon boost off its lows amid reports of the bank reaching a $4 billion settlement with the Federal Housing Finance Agency. On the downside, the health care space (-0.4%) ended in the red. The iShares Nasdaq Biotechnology ETF lost 0.8%.

Economists estimated that the 16-day government shutdown government reduced growth by 0.3 percentage point this quarter. The slower growth and delayed reporting of economic data will prevent Fed policy makers from paring the monthly pace of asset buying until their March 18-19 meeting.

Treasuries were nearly unchanged today on the heels of an economic calendar that was void of any major releases, while data that had been postponed due to the government shutdown is slated to be released starting next week.

Meanwhile, crude oil gained ground, while gold saw pressure and the U.S. dollar was nearly unchanged. Finally, for the week, the Dow rose 1 percent, the S&P was up 2.4 percent and the Nasdaq advanced 3.2 percent.

Our Trend Tracking Indexes (TTIs) headed higher as well and closed the week as follows:

Domestic TTI: +4.50% (last week +3.01%)

International TTI: +8.17% (last week +6.41%)

Have a great week.




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A note from reader Bill:

Q: Ulli: On 9-6-13, FOCPX dropped 8.8% about $6.66 per share. I called a Fidelity rep and he said because Apple fell 9-10% and FBIOX also declared and paid a Capital Gain and Dividend of around $1.189 per share, but it’s sort of floundering around not moving and actually down three days in a row for the last three days.

I guess my question is, are people getting out because of that drop and should I get out also?

I understand when a lot of people get out of a fund they have to sell off and that makes the fund drop.

A: Bill: Here’s how I look at it:

FOCPX made a high of 80.84 on 8/5/13, which would be the number to use for your trailing sell stop. Say, 7.5% of that high would put a sell signal at a break below 74.78, which happened only briefly before this fund recovered. I could not verify the distribution of $1.19.

If that is in fact correct, you need to reduce the high price by that amount, which would make the new high $79.65. Now you calculate the sell stop point of 7.5%, which brings it down to $73.68, which has not been reached yet.

That’s the process I go through to determine if a stop has been triggered. If it has, I will execute the next day, unless there is a huge rebound in the making.

Hope that clarifies your thinking.



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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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