Markets Clear Technical Hurdle

by on October 22, 2011 | ETFs Mentioned:

Earnings season is well underway and investors on Wall Street appear to be quite content with the latest round of corporate performance results from industry leaders. Debt-woes stemming from the Euro zone continue to dominate headlines as investors anxiously await for policymakers to agree upon a comprehensive plan in the near future. Domestic equity indexes climbed higher on Friday to end the week in solid green territory, bolstered by optimism over McDonald’s better-than-expected earnings and the upcoming European Union summit. Gold prices oscillated between the $1,700 and $1,600 levels during the week, with the precious metal settling around $1,640 an ounce on Friday.

Actionable ETF Trade Ideas

Last Week’s Actionable ETF Ideas
Ticker Position Performance
JJG

Long


-0.6%
IEF

Short

-0.1%
UUP

Long

-0.9%

Our picks from Monday’s Insider were directionless at best this week, with all three recommendations turning in minimal losses for the week. 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 Long JJG: Down 0.6%

This ETN got off to a decent start on Monday morning, hoovering right around the $46 level as expected. JJG however slipped lower on Wednesday and further extended losses into Thursday, just barely missing our outlined support at the $45 level. JJG gapped higher at Friday’s opening, however, the fund was unable to hold onto gains and proceeded to work its way lower throughout the day, settling just below $46 a share for the week.

Trade #2 Short IEF: Down 0.1%

We anticipated for this Treasury ETF to decline as equity markets climbed higher this week. Our prediction that equities would end higher turned out to be spot-on, however, our decision to short IEF was a bit mistimed. This recommendation was fairly flat for the week as IEF didn’t really move much, despite growing optimism over the Euro zone debt drama. We advise stepping to the sidelines with this trade and shorting IEF  only if shares close below the $102 level for two or more consecutive days, depending on individual risk tolerance.

Trade #3 Long UUP: Down 0.9%

This was our fundamentally defensive pick for the week and unfortunately UUP did not behave as we had expected. Investor optimism over the Euro zone debt drama pushed the greenback lower in the currency market. It seems that market participants have begun to price in that a resolution plan will come out of Europe sooner rather than later. Were waiting for news out of Europe next week before jumping back into UUP. Investors who are still holding onto their long position should be careful and keep an eye on this ETF as it attempts to hold support above $21.50 a share.

ETFdb Portfolios

Retirement ETFdb Portfolios

Stocks were mixed this past week, although Friday’s rally certainly helped boost our portfolio’s returns. Surprisingly, our conservative Ready To Retire portfolio beat our equity-heavy Aggressive portfolio during a green week on Wall Street. From a year-to-date perspective, our conservative Ready To Retire portfolios is the only one in positive territory.

ETFdb Portfolio Weekly Return YTD Return
Ready To Retire 0.65% 3.34%
5 Years To Retirement 0.61% 0.55%
Moderate 0.57% -0.54%
10 Years To Retirement 0.57% -0.96%
30 Years To Retirement 0.52% -2.62%
20 Years To Retirement 0.49% -2.83%
Aggressive 0.48% -6.72%
Cheapskate -0.16% n/a

Themed Portfolio

Our themed portfolios performed quite well during this past week given that equity indexes were fairly range-bound. The Alpha Seeker 2.0 and Ben Graham 50/50 portfolio’s led the way higher, gaining over a full percentage point each for the week. From a year-to-date perspective, our Simple (But Effective) Safe Haven Portfolio is leading the way higher, while our Emerging & Frontier Markets portfolio sits at the bottom of the barrel, along with the RAFI portfolio, in terms of performance.

ETFdb Portfolio Weekly Return YTD Return
Alpha Seeker Portfolio 2.0 1.03% -2.16%
Ben Graham 50/50 1.02% n/a
Actively-Managed 0.88% -0.98%
The Sky Is Falling 0.85% 5.06%
Euro Free Europe Portfolio 0.61% n/a
High Yield 0.52% 1.99%
Simple (But Effective) Safe Haven 0.37% 7.22%
Ex-Europe 0.32% -2.35
Global Titans 0.23% n/a
Better-Than-AGG Total Bond Market 0.17% n/a
High-Tax Bracket 0.03% -1.95%
Equal Weight -0.07% n/a
RAFI -0.25% -10.64%
AlphaDEX -0.44% n/a
Small Cap -0.58% n/a
Ex-U.S -0.80% -9.18%
Commodity Guru -1.09% n/a
Emerging & Frontier Markets -1.20% -12.61%
Asia-Centric -1.30% -10.24
LatAm Centric -1.41% n/a
Black Swan Hyperinflation -1.67% -2.54

New ETF Highlights

The exchange-traded universe continues to expand in October, and this was another busy week on the product development front, with a handful of new funds launching. Check out our ETF Launch Center for complete updates on all new ETFs.

ETF Launches

Leveraged Precious Metals ETNs

The series of first-to-market ETNs issued by VelocityShares are linked to volatility-based indexes. These eight notes offer leveraged exposure to various precious metals, both long and inverse products covering gold (3x), silver (3x), platinum (2x), and palladium (2x). Below is the complete list of the ETNs that launched:

  • 3x Long Gold ETN (UGLD)
  • 3x Inverse Gold ETN (DGLD)
  • 3x Long Silver ETN USLV)
  •  3x Inverse Silver ETN (DSLV)
  • 2x Long Platinum ETN (LPLT)
  • 2x Inverse Platinum ETN (IPLT)
  • 2x Long Palladium ETN (LPAL)
  • 2x Inverse Palladium ETN (IPAL)

Schwab U.S. Dividend ETF  (SCHD)

  • Launch: October 19th
  • ETFdb Category: All Cap Equities
  • Structure: ETF
  • Expense Ratio: 0.17%

Charles Schwab launched SCHD, tracking the Down Jones U.S. Dividend 100 index, which measures the performance of high dividend yielding stocks. Stocks that are included in the underlying index must have at least ten consecutive years of dividend payments among other requirements.

Minimum Volatility ETFs

  • Launch: October 20th
  • ETFdb Category: Emerging Markets Bonds
  • Structure: ETF
  • Expense Ratio: 0.15%, .20%, .25%, .35%

iShares launched four Minimum Volatility Index Funds this week. These funds seek to offer targeted exposure to domestic and international equity markets. A rules-based methodology is applied to determine the weights to minimize the total volatility of the sub-index. Below is the complete list of the funds that launched:

  • MSCI USA Minimum Volatility Index Fund (USMV)
  • MSCI EAFE Minimum Volatility Index Fund (EFAV)
  • MSCI Emerging Markets Minimum Volatility Index Fund (EEMV)
  • MSCI All Country World Minimum Volatility Index Fund (ACWV)

Emerging Markets Bond ETF (LEMB)

iShares issued another ETF this Thursday offering investors exposure to debt of emerging markets denominated in local currencies. LEMB will seek to replicate the Barclays Capital Emerging Markets Broad Local Currency Bond Index, a benchmark that includes about 290 individual bonds and has an effective duration of slightly less than four years.

 

Disclosure: No positions at time of writing.