Looking Back On A Bloodbath

by on June 4, 2011 | ETFs Mentioned:

The last week started and ended with disappointment on the jobs front, as a stubbornly high unemployment took the wind out of the sails of what had been an impressive rally in recent weeks. Both private ADP payroll figures and the government report disappointed investors still looking for an uptick in jobs creation as affirmation of a sustainable recovery. This data pushed U.S. equity markets sharply lower on the week, though many international stocks climbed higher on more bullish outlooks beyond American borders.

Recapping Our Actionable ETF Trade Ideas

Last Week’s Actionable ETF Ideas
Ticker Position Performance







In this week’s first installment of ETF Insider, we laid out our three actionable investment ideas for this week based on technical indicators. In a week marked by steep declines, two of the ideas fared quite well–while the other fell flat as the expected jump by the S&P 500 relative to the greenback failed to materialize [sign up for a free trial of ETFdb Pro to get access to all three weekly installments of ETF Insider, including three actionable ETF ideas every Monday]:

Trade #1 Long FSU: Down 3.3%

FSU opened higher on Tuesday as investors came back from the long weekend and were noticeably in a buying mood. However, over the next days U.S. equity markets took a beating as disappointing housing, manufacturing, and employment data sent investors running to treasuries. Our perspective remains unchanged however, as the U.S. dollar remained very weak in the currency market even while equities were selling-off. We are not blindly hoping for a full-scale equity market rebound next week, however, we remain confident that domestic large-caps will be able to outperform the steadily-falling U.S. dollar, and thus we recommend holding onto the current long position in FSU. Our support level remains unaltered as well, and we recommend that investors close out the trade and re-evaluate the ongoing uptrend if FSU closes below $26 a share next week.

Trade #2 Long CEW: Up 0.5%

Our recommendation to long emerging currencies through CEW turned out to be fairly spot-on as this trade has posted a modest gain of half a percentage point thus far. This fund is slowly but surely drifting higher as anticipated and we are confident that it may very well hit our price target of $23.50 a share next week. Profit taking may unfold over the next few days if uncertainty amongst investors remains terribly high,  in which case CEW could quickly decline back towards the $23 mark. Investors should close out the long position and re-evaluate the ongoing uptrend if the fund closes below $23 a share next week.

Trade #3 Long GLD: Up 0.2%

It’s frustrating when a trade recommendation flat-lines even when all market fundamentals are confirming your hypothesis. While we certainly didn’t go wrong with going long GLD, we had anticipated a much stronger move to the upside. Despite incredible weakness across equity markets last week, gold failed to surge higher as investors were reluctant to shift funds into the already hot commodity. As with all of our picks from last week, we recommend holding onto GLD over the next few trading days since the fund still offers tremendous upside potential from both a fundamental and technical perspective. Establishing support above $150 a share this week will be GLD’s main challenge, and we recommend closing out the trade if shares sink below the $148 level. Our near-term price target remains at $153 a share.

ETFdb Portfolios

Retirement ETFdb Portfolios

This week was a bloodbath for the long-term ETFdb portfolios, as big drops in U.S. equity markets weighed on performances. Longer-term portfolios with bigger equity allocations struggled the most, while those with heavier allocations in fixed income held their ground somewhat:

ETFdb Portfolio Weekly Return YTD Return
Ready To Retire -0.60% 4.06%
Cheapskate -0.68% n/a
Moderate -0.89% 4.15%
10 Years To Retirement -1.15% 4.09%
5 Years To Retirement -1.18% 3.52%
20 Years To Retirement -1.33% 4.36%
30 Years To Retirement -1.46% 4.42%

Themed Portfolios

The weekly disparities among the themed ETFdb Portfolios were more significant, as three of the portfolios with smaller allocations (or zero allocation) to U.S. stocks jumped higher over the last several days. Emerging markets in particular surged, and the Ex-U.S. and Asia Centric portfolios also closed a performance gap.

ETFdb Portfolio Weekly Return YTD Return
Emerging & Frontier Markets 0.70% 0.19%
Ex-U.S. 0.55% 3.70%
Asia Centric 0.43% -0.34%
Sky Is Falling -0.13% 0.21%
Black Swan Hyperinflation -0.48% 4.28%
Ben Graham 50/50 -0.53% 5.42%
High Tax Bracket -0.63% 3.19%
High Yield -1.13% 4.36%
RAFI -1.42% 3.19%
Alpha Seeker 2.0 -1.50% 6.04%
Actively-Managed -1.72% 4.74%

New ETF Highlights

The past several days were relatively quiet in terms of new product launches–thanks no doubt to the holiday-shortened week. Guggenheim overhauled a pair of bond ETF’s, transforming them into attractive actively managed funds, while IndexIQ debuted the first of its kind mid-cap Japan equity fund. Amidst a market sell-off and a bumpy week for commodities, a new commodity producers ETF has hit the street, giving investors exposure to the global farming industry.

ETF Launches

Global X Farming ETF (BARN)

This new fund will seek to replicate the Solactive Global Farming Index, a benchmark that is designed to reflect the performance of the global farming industry. BARN joins a number of agribusiness ETFs, though this product features some significant distinctions from MOO, PAGG, and CROP [see detailed review of BARN].

IndexIQ Japan Mid-Cap ETF (RSUN)

  • Launch: June 2
  • ETFdb Category: Japan Equities
  • Structure: ETF
  • Expense Ratio: 0.69%

This new addition to the Japan Equities ETFdb Category gives investors an option for targeting mid cap stocks; a number of existing ETFs focus on the large cap and small cap sectors of the world’s second largest economy. RSUN may be appealing as a way to play industrial and materials firms in Japan, which will be in focus in coming months as reconstruction continues [see complete review of RSUN].

Guggenheim Enhanced Core Bond ETF (GIY) and Guggenheim Enhanced Ultra-Short Bond ETF (GSY)

Guggenheim introduced two new active ETFs by overhauling a pair of existing indexed bond funds, changing names and ticker symbols and dropping the target index altogether. GIY (previously UBD) will invest primarily in U.S. dollar-denominated investment grade debt securities, including U.S. Treasury securities and corporate bonds (think of this fund as an active alternative to AGG and BND).

GSY (previously ULQ) will also focus on investment grade securities, though this fund will hold those at the short end of the maturity spectrum, maintaining an average duration of less than one year [see complete review of GIY and GSY].

Disclosure: No positions at time of writing.