Bears On Parade

by on September 24, 2011 | ETFs Mentioned:

Last week was quite grim for investors to say the least, as stocks across the board plunged Wednesday afternoon following the Fed’s decision to proceed with “Operation Twist” and nothing more. Equity indexes extended their losses and fell even lower the following day as investor worries surrounding the outlook of the U.S. economy intensified following Bernanke’s weaker-than-expected stimulus announcement. Meanwhile, in commodity markets, gold lost its luster amongst safe haven investors as the precious metal plunged big time on Friday, with futures prices shedding over 5% for the day, settling below $1,650 an ounce. This may come as a surprise given that European debt woes are still lingering and volatility likely won’t evaporate any time soon given the mountain of pessimism weighing down on the markets as we start the new week.

Actionable ETF Trade Ideas

Last Week’s Actionable ETF Ideas
Ticker Position Performance
XLV

Short

  3.7%
QQQ

Long

0.9%
FLAT

Long

3.3%

Our picks from Monday’s Insider fared quite well this week, with two of our recommendations posting strong gains during an absolutely dismal week on Wall Street. Below, we highlight how our trade ideas fared during the week [sign up for a free trial of ETFdb Pro to get actionable ETF ideas every Monday, as well as access to more than 25 all-ETF model portfolios].

Trade #1 Short XLV: Up 3.7%

We recommended taking a short position in XLV as the fund had been previously struggling to climb back above its 200-day moving average. Our bearish suspicions proved to be correct as this ETF once again failed to break above its 200-day moving average, and proceeded to slip lower as anticipated. We recommended taking profits at $32 a share, however, XLV opened below that level on Thursday, leaving us with a better-than-expected gain of 3.7%.

Trade #2 Long QQQ: Down 0.9%

Our technical analysis saved us from incurring some serious losses in this trade as we advised conservative investors to stay away on Wednesday after the fund failed to close above its 200-day moving average. Our bearish suspicions proved to be correct once again as QQQ tanked on Friday alongside the rest of the market. QQQ is still quite attractive at current levels for those with a long-term investment horizon, although we would advise conservative traders to stay away until the fund establishes definitive support above its 200-day moving average for three or more consecutive days, depending on individual risk tolerance.

Trade #3 Long FLAT: Up 3.3%

This was our fundamentally defensive position for the week and FLAT’s performance was anything but flat over the past few sessions. This trade went in our direction after “Operation Twist” sent investors running to long-term U.S. Treasuries and out of short-term bonds, allowing us to lock-in a respectable 3.3% gain. We expect for this fund to continue drifting higher, perhaps towards $60 a share, or until European lawmakers offer concrete guidance going forward and investors reconsider their safe haven investment positions.

ETFdb Portfolios

Retirement ETFdb Portfolios

Equity markets tanked hard over the last few trading days and our retirement portfolios couldn’t keep their heads above water, with every single one finishing in red territory for the week. From a year-to-date perspective, our conservative Ready To Retire portfolio is is the only one still holding on to gains. 

ETFdb Portfolio Weekly Return YTD Return
Ready To Retire -2.82% 0.65%
5 Years To Retirement -4.12% -3.75%
Moderate -4.92% -5.07%
10 Years To Retirement -5.22% -6.14%
Cheapskate -5.57% n/a
20 Years To Retirement -6.66% -9.05%
30 Years To Retirement -6.69% -9.13%
Aggressive -7.91% -13.23%

Themed Portfolio

Our themed portfolios have been suffering during these recent weeks on Wall Street, with volatility eating way at our gains, leaving us with no portfolios in green territory for the week. The ultra-defensive Sky Is Falling portfolio is the leader in the group when comparing year-to-date performances, while the Simple (But Effective) Safe Haven portfolio is the only other one in positive territory for the year.

ETFdb Portfolio Weekly Return YTD Return
Sky Is Falling -1.31% 4.76%
High Yield -4.40% -3.02%
Equal Weight -4.45% n/a
High Tax Bracket -4.54% -5.39%
Simple (But Effective) Safe Haven -5.20% 2.7%
Ex-Europe -5.26% -6.54%
Actively Managed -5.37% -6.18%
Asia Centric -5.80% -12.99%
Alpha-Seeker 2.0 -6.22% -7.24%
Small Cap -6.67% n/a
Ex-U.S -7.72% -14.57%
Emerging & Frontier Markets -8.23% -16.04%
RAFI -8.43% -18.5%
Black Swan Hyperinflation -9.65% -5.65%

New ETF Highlights

September continues to be a very eventful month for the ETF industry as newcomer FlexShares joins the pack, rolling out four new products, while Teucrium expanded its commodity fund line-up with three agricultural products. Check out our ETF Launch Center for complete updates on all new ETFs.

ETF Launches

Teucrium Soybean Fund (SOYB)

Teucrium, expanded its suite of commodity specific funds, adding three new products to its intriguing line-up, including a first-to-market soybean ETF. SOYB  invests in CBOT soybean futures, spreading exposure across three separate maturities: second-to-expire futures contract are weighted 35%, third-to-expire are weighted 30%, and the CBOT Soybean Futures Contract expiring in the November following the expiration month of the third-to-expire contract receive a weighting of 35%. Teucrium also rolled out a Sugar Fund (CANE) and a “pure play” Wheat Fund (WEAT), both employing a unique roll structure that spreads out maturities, similar to the one employed by SOYB.

Barclays iPath Inverse S&P 500 VIX Short-Term Futures ETN (IVOP)

  • Launch: September 19th
  • ETFdb Category: Volatility
  • Structure: ETN
  • Expense Ratio: 0.89%

iPath closed the doors on IVO last week and the issuer has been quick to roll out the successor fund, IVOP, which will maintain a generally similar investment objective. The new ETN will mature in September 2021 and will offer inverse exposure to an index comprised of first and second month VIX futures contracts.

Credit Suisse Market Neutral Equity ETN (CSMN)

  • Launch: September 21st
  • ETFdb Category: Long-Short
  • Structure: ETN
  • Expense Ratio: 1.05%

Credit Suisse launched a new alternative equity fund linked to the HS Market Neutral Index, which selects stocks from a universe of the 275 largest North American stocks, 300 largest European stocks, and 175 largest Japanese stocks. Using a unique methodology, 75 long positions and 75 short positions are determined, with each stock assigned a base weight of about 1.33% (or -1.33%) in the benchmark. The underlying index for CSMS also breaks down the universe into sector and region “buckets” as well, a feature that will result in both sector and market neutrality.

Guggenheim Yuan Bond Fund (RMB)

Guggenheim has won the race to launch the first U.S.-listed ETF offering pure play exposure to the Chinese bond market. RMB’s underlying index currently consists of about 37 debt securities that are eligible for investment by international investors and are denominated in Chinese yuan. Investors should also note the credit breakdown as more than half the fund’s holdings are not rated by S&P, making this far too risky of a play in the current environment for many investors.

PowerShares China Yuan Dim Sum Bond Portfolio (DSUM)

PowerShares rolled out DSUM, a cheaper alternative to RMB, which tracks the Citigroup Dim Sum (Offshore CNY) Bond Index. This ETF measures the performance of Chinese Yuan-denominated “Dim Sum” bonds that are issued and settled outside of Mainland China.

FlexShares Launch

  • Launch: September 23d
  • Structure: ETF

Chicago-based asset manager, Northern Trust, is jumping back in the ETF industry with their recent launch of four FlexShares ETFs. The new products include a pair of TIPS funds and a pair of intriguing equity offerings, one employing a unique multi-factor modeling approach and the other one focusing on “pure play” commodity producers. The new products include:

  • FlexShares Morningstar U.S. Market Factor Tilt Index Fund (TILT)
  • FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR)
  • FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (TDTT)
  • FlexShares iBoxx 5-Year Target Duration TIPS Index Fund (TDTF)

Disclosure: No positions at time of writing.