France Downgrade Erodes Confidence

by on January 14, 2012 | ETFs Mentioned:

Equities inched higher throughout the week, bolstered by positive economic data release on the home front coupled with encouraging developments in the debt burdened Euro zone. Euphoria spread throughout Wall Street as investors digested better-than-expected consumer credit data along with optimistic forward looking commentary released by the Fed in the latest Beige Book report. Investors overseas were cheerful as well as borrowing costs dropped after successful Spanish and Italian debt auctions. However, much of the gains on the week evaporated on Friday as investors gave into selling pressures following the downgrade of France’s credit rating and worse-than-expected earnings results from J.P. Morgan.

Actionable ETF Trade Ideas

Last Week’s Actionable ETF Ideas
Ticker Position Performance
FXB

Long


-0.9%
DBC

Short

1.2%
XLI

Long

2.3%

Our picks from Monday’s Insider posted a fairly strong performance this past week, with two of our recommendations turning solid gains, while our third position incurred a small loss. 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 35 all-ETF model portfolios].

Trade #1 Long FXB: Down 0.9%

This recommendation got off to a strong start on Monday morning as the British pound inched higher from last Friday’s close; bullish momentum continued into Tuesday and FXB neared $154 a share as the trading session drew to a close. However, resurfacing Euro zone woes on Wednesday created major headwinds for this ETF and FXB gapped lower as the opening bell rang. We stuck to our rules and cut our losses once this ETF dipped below the $152 level. Our technical analysis saved us from incurring steeper losses, seeing as how FXB sank as low as $151.18 a share on Friday. 

Trade #2 Short DBC: Up 1.2%

This short trade went in the wrong direction at the start of the week as commodity prices pushed higher, bolstered by a weaker U.S. dollar. DBC came close to our stop-loss at the $28 level on Tuesday after it got all the way up to $27.92 a share. Nonetheless, our bearish suspicions proved correct as DBC sank lower on Wednesday. Selling pressures prevailed in the final trading days of the week, and while DBC missed our $26 price target, this short recommendation still clinched a 1.2% gain on the week.

Trade #3 Long XLI: Up 2.3%

Our bullish suspicions proved to be correct with XLI as encouraging economic data releases on the home front pushed this industrial ETF higher throughout the week. XLI made a big jump on Tuesday, settling above $32.25 a share; surprisingly this ETF held support above this level for the rest of week, even amidst the broad-based selling pressures on Friday. We were a bit disappointed after XLI missed our price target at $36 a share on Thursday by just a few pennies. Nonetheless, this trade recommendation ended the week in green territory, clinching a 2.3% gain.

ETFdb Portfolios

Retirement ETFdb Portfolios

Earnings euphoria on Wall Street coupled with optimistic economic commentary from the Fed paved the way higher for stocks across the board as investors increased their risk-appetite. Our equity-heavy 30 Years Til Retirement and Aggressive portfolios led the pack higher as investors jumped ship from bonds and into stocks. All in all our retirement portfolios fared quite well, which every single one finishing the week in green territory.

ETFdb Portfolio Weekly Return
30 Years Til Retirement 1.53%
Aggressive 1.51%
20 Years Til Retirement 1.36%
10 Years Til Retirement 1.13%
Moderate 1.10%
Cheapskate 0.98%
5 Years Til Retirement 0.93%
Ready To Retiret 0.66%
Low Volatility 0.13%

Regional ETFdb Portfolios

Investors confidence in emerging markets improved considerably throughout the week and our regional portfolios thrived. Easing concerns over Europe helped to restore confidence in the global economy; our Latin American and Africa-Centric portfolios gained over two full percentage points on the week, regaining lost ground from the past few weeks. As a whole, our regional portfolio also posted a noteworthy performance, with all of them finishing in positive territory for the week.

ETFdb Portfolio Weekly Return
LatAm-Centric 2.26%
Africa-Centric 2.24%
Emerging & Frontier Markets 1.94%
Asia-Centric 1.78%
Easy-As-ABC 1.55%
Ex-U.S. 1.13%
Ex-Europe 1.05%
Euro Free Europe 0.94%
Global Titans 0.62%

Themed ETFdb Portfolios

Our themed portfolios climbed higher across the board as economic growth expectations improved, helping to restore some confidence back in the markets. Our Futures Free Commodity and High Tech portfolios charged ahead, while our Energy Bull portfolio turned in a dismal performance for the week [see All Portfolio Returns].

ETFdb Portfolio Weekly Return
Futures Free Commodity 2.33%
High Tech 2.11%
RAFI 1.83%
Equal Weight 1.78%
Small Cap 1.61%
High Tax Bracket 1.55%
AlphaDEX 1.38%
High Yield 1.26%
Actively Managed 1.16%
Alpha Seeker 2.0 0.84%
Socially Responsible 0.77%
Kitchen Sink 0.70%
Financials Free 0.64%
Black Swan Hyperinflation 0.57%
Better-Than-AGG Total Bond Market 0.54%
Simple (But Effective) Safe Haven 0.25%
The Sky Is Falling -0.16%
Cheapskate Hedge Fund -0.25%
Energy Bull -0.95%

New ETF Highlights

The exchange-traded universe continues to evolve as several issuers filed plans with the SEC for new products and several new fund hit the street this past week. Check out our ETF Launch Center for complete updates on all new ETFs.

ETF Launches

Direxion S&P 500 RC Volatility Response Shares (VSPY)

Direxion launched their new S&P 500 RC Volatility Response Shares ETF, VSPY, which is designed to respond to the volatility of the S&P 500 Index. The fund’s underlying index responds to volatility by establishing a specific volatility target that adjusts the Index’s components among an allocation to the Stock Component and the Cash Component based upon realized exponentially-weighted historical volatility of the S&P 500 Index.

Direxion S&P 1500 RC Volatility Response Shares (VSPR)

  • Launch: January 11th
  • ETFdb Category: All Cap Equities
  • Structure: ETF
  • Expense Ratio: 0.45%

Direxion also introduced their new S&P 1500 RC Volatility Response Shares ETF, VSPR, which is designed to respond to the volatility of the S&P 1500 Index. The fund utilizes the same methodology as VSPY to respond to volatility by establishing a specific target that adjusts to the Index’s components.

Direxion S&P Latin America 40 RC Volatility Response Shares (VLAT)

Direxion debuted their S&P Latin America 40 RC Volatility Response Shares ETF, VLAT, which is designed to respond to the volatility of the S&P Latin America 40 Index. The benchmark is comprised of 40 stocks drawn from four major Latin American markets: Brazil, Chile, Mexico and Peru.

Rockledge SectorSAM ETF (SSAM)

  • Launch: January 12th
  • ETFdb Category: Long-Short
  • Structure: ETF
  • Expense Ratio: 1.50%

AdvisorShares launched their new Rockledge SectorSAM ETF, SSAM, which seeks to generate stable and consistent returns in all market conditions, developing a dollar neutral portfolio comprised of sector ETFs. The fund utilizes the Sector Scoring and Allocation Methodology (“SSAM”), a technique based on a proprietary quantitative analysis model that forecasts the projected returns to various sectors of the U.S. economy.

30 Year TIPS/TSY Spread ETF (RINF)

  • Launch: January 12th
  • ETFdb Category: Long-Short
  • Structure: ETF
  • Expense Ratio: 0.75%

ProShares introduced the first inflation breakeven ETF to the markets with their 30 Year TIPS/TSY Spread ETF, RINFThe fund seeks to deliver results that correspond to the performance of the Dow Jones Credit Suisse 30-Year Inflation Breakeven Index. The index is comprised of long positions in the most recently issued 30-Year TIPS and duration-adjusted short positions in U.S. Treasury bonds of the closest maturity.

Short 30 Year TIPS/TSY Spread ETF (FINF)

  • Launch: January 12th
  • ETFdb Category: Long-Short
  • Structure: ETF
  • Expense Ratio: 0.75%

ProShares launched yet another inflation breakeven ETF: the Short 30 Year TIPS/TSY Spread ETF, FINFThe fund seeks to deliver daily returns that equal -1x of the daily change in the Dow Jones Credit Suisse 30-Year Inflation Breakeven Index.

MSCI Hong Kong Small Cap Index Fund (EWHS)

  • Launch: January 12th
  • ETFdb Category: China Equities
  • Structure: ETF
  • Expense Ratio: 0.59%

iShares launched their new MSCI Hong Kong Small Cap Index Fund, EWHS, which tracks an index that is designed to offer investors exposure to small cap stocks listed in Hong Kong.

MSCI Singapore Small Cap Index Fund (EWSS)

iShares debuted their new MSCI Singapore Small Cap Index Fund, EWSS, which offers exposure to small cap stocks in Singapore, a small developed Asian market that has shown tremendous growth potential in recent years.

MSCI World Index Fund (URTH)

  • Launch: January 12th
  • ETFdb Category: Global Equities
  • Structure: ETF
  • Expense Ratio: 0.24%

iShares introduced their MSCI World Index Fund, URTH, which tracks an index that represents the performance of stocks in developed market countries (including the U.S.) available for purchase by global investors.

Disclosure: No positions at time of writing.