Global Gold Trends (ETF: GLD, IAU, GDX, DGL, DBP)
Stock Market Symmetry Scenario Gives S&P 500 Decline More Room to Run
Let's say that the symmetry exhibited by the March-May rally with the January-March decline continues into the future. What would the next leg of the S&P 500 look like?
Looking at the e-mini futures chart (which gives us a view ahead of Monday¹s open on the cash markets), if we decide to take the May high at 929.50 as the end of the upleg from the March low at 662.50 -- which is symmetrical with the January-March decline -- then the current weakness into the 880-878 area represents THE START of a much larger downleg that will mimic the inverse of the November-January price move from 735.25 to 939.50.
That would mean that the e-mini S&P 500 has embarked on a decline into the vicinity of 735 to achieve symmetry within a much larger developing pattern -- after which another massively powerful bull leg will emerge that will leave behind a much larger base pattern from where an extended period of very positive price action could (will) emerge.
If the e-mini S&P opens weaker on Sunday-Monday and sustains beneath the 20 DMA (now at 879.20), then the 'symmetry scenario' will begin to gain added significance in my work. ETF traders might want to keep an eye on the ProShares Ultrashort SPY (NYSE: SDS).
Full Story: http://www.marketoracle.co.uk/Article10712.html The “Silent Rally” In Gold
It was a typical options expiration week with markets showing a lassitude that normally accompanies this event. Trading volume was relatively low and action was lacking for the most part across the board as traders seemed to be on a mental vacation this week.
The SPDR Gold Trust ETF (GLD) was up for the week to finish at 91.55. This is our main proxy for the gold price and we have a trading position in GLD after we got a buy signal back in April when GLD broke out above the dominant immediate-term 15-day moving average.
The gain in GLD in recent days has been very gradual but steady and reflects the building of buying interest in gold as a “safe haven” as fears linger over the sustainability of the huge equity market gains since March. Institutional interest has seen gold and the gold ETFs turn into temporary vehicles to park gains from profitable equity trades during broad market corrections.
How much of gold’s rally is a function of future inflation expectations? That’s difficult to assess and we’re still too early in the financial recovery process to be able to answer this. The consensus among financial pundits is that gold is a “sure shot” to take off from here and eventually reach $1,000/oz. based on the multi-trillion dollar stimulus package. Some commentators are calling for even more liberal upside targets. It’s a common assumption that the stimulus will inflate commodities and spark another round of global inflation for hard assets. I would caution that this is far from a foregone conclusion, however.
The closest parallel, in purely financial terms, to what we’re seeing this year is the financial market recovery of 1975. That followed a severe pounding in equity prices that began in January 1973 and continued until the Kress 10-year and 40-year cycles bottomed in October 1974. Following this the Dow gained 100% off its’74 low and continued to rally into 1976. As we discussed in a recent report, the 10-year cycle low in 1974 coincided with the 6-year cycle peak in 1975 to form a bullish cyclical pattern that allowed share prices to rally vigorously for the single best percentage gain of our lifetime.
This year there is a somewhat similar cyclical pattern with the Kress 6-year cycle having bottomed last fall and is now ascending while the 10-year cycle is peaking. This is the reverse of what happened in 1975 but still the two key yearly cycles are in a bullish configuration, which partly explains the sizable gains that have already been made in equities this year.
So how did the gold price fare in 1975? After a parabolic type uptrend from 1971 through the early part of 1975, the yellow metal began a downtrend that lasted until the later part of 1976.
Full Story: http://news.goldseek.com/ClifDroke/1242583200.php
Yes, you can keep 401(k) costs in check
In fact, it is possible to manage 401(k) plans for well under 0.75 percent. I've written about it for years. It can be done by any worker who invests in index mutual funds or exchange-traded index funds. It can be done by following William Bernstein's directions for "the coward's portfolio," Bill Schultheis' instructions for his "coffee house portfolio" or building my Couch Potato Building Block portfolios. (You can read about them, their trailing time period performance and their history at www.assetbuilder.com.)
You can, for instance, build the most basic Couch Potato portfolio (50/50 total domestic equity market/TIPs) using Vanguard mutual funds with a starting investment of $6,000. Its annual expense ratio will be less than 0.20 percent. And there will be no commissions to pay.
But suppose you want more inflation protection? Is there a simple, low-cost way to build such a portfolio – a way to use an account at Fidelity, Schwab, TDAmeritrade, E-Trade, Bank of America, USAA or any other discount brokerage platform?
Yes. Use low-cost, exchange-traded funds. Buy equal amounts in each of six categories. Here's the recipe. Note that three parts – TIPS, REITs and energy – are recognized inflation hedges.
Your ingredients
Combine equal parts:
• Vanguard Total Stock Market ETF (ticker: VTI) with an expense ratio of 0.07 percent. This fund allows you to buy the entire domestic stock market.
• iShares TIPS ETF (ticker: TIP) with an expense ratio of 0.20 percent. This fund gives you ownership of an inflation-protected portfolio of U.S. government securities.
• iShares MSCI EAFE ETF (ticker: EFA) with an expense ratio of 0.34 percent. This fund allows you to buy the entire equity market of the developed economies.
• SPDR Barclays International Trust Bond ETF (ticker: BWA) with an expense ratio of 0.50 percent. This fund gives you broad ownership of international government bonds.
• Vanguard REIT ETF (ticker: VNQ) with an expense ratio of 0.10 percent. This fund tracks a broad index in domestic real estate investment trusts.
• SPDR Energy ETF (ticker: XLE) with an expense ratio of 0.21 percent. This fund tracks an index of major energy companies.
Put more in the pot each year. Rebalance as necessary. Simmer for as long as possible.
Full Story: http://www.dallasnews.com/sharedcontent/dws/bus/columnists/sburns/stories/DN-burns_17bus.ART.State.Edition1.3cbb6b3.html Investors shouldn’t chase the rally in U.S. stocks. Instead, look for opportunities in foreign stocks.
Emerging-market stocks have returned to life — but how long can it last?
MSCI’s emerging-market index is up about 23% this year, down from year-to-date gains of about 28% last Friday. Investors have poured into emerging-market stocks and currencies as they redevelop a taste for risk. Brazil is one case in point — lately, run-ups there have been so sharp that central banker Henrique Meirelles said recently that an excess of optimism could be dangerous, and lead to disappointment at the first negative number......
......Yesterday, Van Eck Global launched an exchange-traded fund of Brazilian small-cap stocks (BRF) (SEE RELATED STORY), an investment play on Brazil’s growing consumer class......
......For gains to continue over the longer haul, company earnings will have to rebound, says David Semple, director, international equity, at Van Eck. Most emerging markets now appear “fully valued” on a forward basis, but earnings should also be troughing, he says. Rising earnings and estimates would presumably keep valuations attractive going forward, helping the rally continue.
Full Story: http://blogs.wsj.com/marketbeat/2009/05/15/watch-for-falling-brics/ How To Use Options With ETFs
Exchange traded funds (ETFs) are useful investment tools and trading options on ETFs is one of the many ways you can maximize the benefits of them.
Trading options on ETFs could potentially allow traders to use the leverage of derivative markets to increase gains from ETF trades, writes David Penn for Yahoo! Finance. It should be noted that not all ETFs have liquid options, which means most investors should stick with more widely-traded index ETFs and liquid country ETFs.
Calls are options used when the prices are thought to be heading higher - they give an investor the right, but not the obligation, to buy a stock at a pre-set price.In other words, you’re “reserving” today’s prices for an item that you think may be priced higher at a future date.
Penn says the basic options strategy for ETF traders is buying deep in the money calls with long signals in ETFs, or buying deep in the money puts to fulfill short ETF signals. Let’s translate that.
“Deep in the money” refers to calls that have a strike price that is 2 or 3 strike prices below the current price of an ETF. As an example, if an ETF were priced at $44 and a long signal on the close was received, a deep in the money call would be a call with a strike price of $40 or even $35.
With short ETF signals, traders may use puts if prices are thought to head lower and increase in value as the markets abate. Buying puts deep in the money is a way to use puts on overbought ETFs.
Full Story: http://www.etftrends.com/2009/05/how-use-options-etfs.html MacroMarkets Terminating Oil Up/Down ETPs
InvestmentNews reported Friday that MacroMarkets LLC will be closing its oil funds. The MacroShares $100 Oil Up Trust (NYSE Arca: UOY) and the MacroShares $100 Oil Down Trust (NYSE Arca: DOY) will cease trading on June 25, with distribution payments made to shareholders on July 6, the article said.Buyers Lining Up For Barclays’ iShares Unit
The pursuit of Barclay’s prized iShares unit, the No. 1 ETF firm, continues to heat up. Could ETFs emerge as a more widely sought financial product in the future? It certainly looks that way from the interest Barclays is seeing not only in its iShares business but now its entire asset management unit, BGI. The British bank confirmed on May 15 that it’s considering selling BGI for up to $12 billion, with BlackRock and Bank of New York Mellon reportedly heading the list of suitors.
Under the terms of a sale agreement to it signed in April, Barclays has until June 18 to look for an offer that would top the roughly $4.4 billion price that private equity firm CVC Capital Partners is willing to pay for iShares. A number of firms are said to have shown interest in iShares and BGI, including Vanguard, another of the three biggest ETF providers.
The thought that BlackRock is open to such a big acquisition tells the world that BlackRock, and possibly other strategic acquirers, see this product as having a very hopeful future, says David Elan, a principal at Boston-based Windward Investment Management, 95% of whose holdings are in ETFs. That BlackRock would be willing to find the money for such a deal in these capital-constrained times is even more impressive.
Reportedly, all the deals that Barclays is considering would allow it to keep a stake in BGI, which manages $1.5 trillion in indexed assets. Its agreement with CVC excluded the lucrative share lending part of iShares, which earns big fees by lending shares in its funds to short sellers. Even though iShares, with about $300 billion in assets, is a small portion of BGI, Matt Hougan, editor of IndexUniverse.com, estimates that ETFs would account for half the price tag of $10 billion or more for BGI.
ETF investors should hope that whoever ends up buying BGI or one of its parts doesn’t take on too much debt to do so, and consequently have to raise management fees and take other steps to increase margins, says Hougan.
Full Story: http://www.businessweek.com/investing/insights/blog/archives/2009/05/bids_for_barcla.html?chan=top+news_top
Canadian Investor group blasts makers of leveraged ETFs
An investor rights group on Thursday blasted the makers of leveraged ETFs and urged regulators to enforce tighter standards for disclosure and advertising in a market that has swelled to $2.5-billion in assets just two years.
The Foundation for Advancement of Investor Rights (FAIR) said regulators should require sellers of leveraged and inverse exchange-traded funds -- made only by BetaPro Management Inc. in Canada -- to file a new prospectus carrying an explicit warning that they are not suitable for holding longer than a few days "nor are they for virtually all retail portfolios."
"There's a lot of detailed disclosure in the prospectus about risk but nowhere does it bluntly tell you you could be completely right in your selection of an ETF and find out that despite being right, you lose money," said Ermanno Pascutto, FAIR executive director. "In several cases, no matter which way you bet over the past year, you would have lost money."
A former regulator himself, Mr. Pascutto founded FAIR a year ago with funding from the predecessor to the Investment Industry Regulatory Organization of Canada.
Full Story: http://www.financialpost.com/creditcrunch/story.html?id=1597265 Barclays confirms ‘expressions of interest’ in BGI
Barclays PLC officials today confirmed they’ve received “a number of expressions of interest, including unsolicited interest” in BGI, its money management division.
Gemma Abbott, Barclays spokeswoman, declined to provide further details about the bids for BGI......
......“Barclays will update the market further upon the conclusion of the go-shop process,” according to the statement.
Separately, banking sources familiar with the possible sale said BlackRock, Bank of New York Mellon and Fidelity could be among those interested in acquiring BGI.
Full Story: http://www.pionline.com/article/20090515/DAILYREG/905159983 Financial Sector Play: Large vs. Regional Banks (ETF: KBE, KRE)
One trade I have been extremely bullish on is a long position on the KBW Bank Index (KBE) while shorting the KBW Regional Bank Index (KRE). This trade has worked out very well ever since I wrote on RealMoney’s Columnist Conversation with the trade. The play is betting on the relative out-performance of the large cap banks compared to smaller regional banks. The trade is unique in the sense that you are hedging your downside risk by shorting the Regional Bank Index, but profit when the spread widens.
In more detail, the KBE is an ETF of the 20 largest banking institutions in the U.S. Players like Bank of America (BAC), Wells Fargo (WFC), J.P. Morgan, US Bancorp, and Bank of New York Mellon (BK) make up the top five holdings of the security. The KRE ETF replicates the KBW Regional Banking Index, which is an equal weighted index of over 50 geographically diverse regional banking institutions. Top players in the KRE include First Niagra Financial Group (FNFG), WestAmerica Bancorp (WABC), TCF Financial (TCB), Hudson City Bancorp (HCBK), and City National (CYN).
Full Story: http://www.forexhound.com/article/Fundamentals/Daily_Reports/Financial_Sector_Play_Large_vs_Regional_Banks/132696 Shiller: Now You Can Short Housing (ETF: DMM)
“One reason we have bubbles in the housing market is because there's been no way to short housing,” the Yale professor tells Time.
“The ability to short is essential to an efficient market, otherwise there's nothing to stop zealots from pricing things abnormally high.”
One version of the ETF (UMM) allows investors to buy the index.
“It's like buying a house, except you don't have to go through the real estate agent, take possession of a property, maintain it, rent it out,” Shiller says.
The other offering (DMM) provides an opportunity to short the index.
“Markets like this will also create an infrastructure for products,” Shiller says. “For example, insurers could issue home-equity insurance and then hedge themselves by taking a position in this market.”
Full Story: http://moneynews.newsmax.com/streettalk/shiller_short_housing/2009/05/15/214868.html 5 ETFs to Buy on the Pullback
The rally fizzling as much as 5% this week put the dreaded but not unexpected correction into the forefront of the market's mind. But rather than fret, investors should be filling out their shopping lists. After all, stocks have never moved in a straight line and -- more important -- the whole point is to buy low. So while the current retreat after a remarkable two-month rally might be a bit unnerving, professional investors say it's also making some appealing plays cheaper by the day.
"We're thinking 9500 to 10000 on the [Dow Jones Industrial Average] would not be out of the realm of possibility in this bear-market rally," says Dean Barber, president of Barber Financial Group, a Lenexa, Kan., wealth management firm. "But we're anticipating a pullback to somewhere in the 7800-range. At that point in time we think there's going to be some opportunities."......
- Brazil and China: Clark likes the iShares MSCI Brazil (EWZ) and iShares FTSE/Xinhua China 25 (FXI) ETFs. "If you missed Brazil or China, you need to be looking for it," he says. "Anytime Brazil [EWZ] goes below $46 you need to be in."
- Small-Cap Growth: Rubino Financial Group, says small-cap growth is his favorite area after emerging markets, "and I would like it even more if it pulled back 10%." With an expense ratio of just 0.11%, the Vanguard Small-Cap Growth (VBK) ETF offers cheap, broad exposure to this asset class.
- Technology: Keith McCullough, chief executive of ResearchEdge, a New Haven, Conn., research firm, is advising clients to go long on the SPDR Technology Select Sector (XLK) ETF, noting that another big potential catalyst is that tech benefits from the various stimulus packages enacted throughout the globe.
GETTING PERSONAL: For Leveraged ETFs, Triple May Be Limit
Leveraged exchange-traded funds have been offering investors more and more bang for their buck. But while funds that triple daily returns recently became a hit, that doesn't necessarily mean quadruple funds are on the way.
Since so-called leveraged and inverse ETFs appeared in 2006, the pattern has been clear. Investors like funds that offer the chance for bigger and bigger gains - despite the risk of bigger losses.
While the fund industry has so far responded by upping the ante, experts say even more extreme funds would face design hurdles, such as extra costs and problems tied to market volatility. Unless someone uses a new blueprint, current levels of leverage could be the limit.
"We have no plans to launch products with higher leverage points," says Andy O'Rourke, marketing director at Direxion Funds, which created a stir last year by launching funds that multiply daily returns by three. "If you had four-times or five-times (leverage) it would make it more difficult to run the fund."
Direxion's chief rival, ProFunds Group, wouldn't comment on product plans. Rydex Investments, a third firm that offers leveraged ETFs, said multiples of four or five are "not something were looking at."
Investors' preference for the high-proof stuff became clear early on. When ProFunds launched the first bear and bull ETFs three years ago, it offered two types that let investors bet against the market: "inverse" funds that rose 1% if the market fell 1% and "double inverse" funds that rose 2% in the same scenario. (All long funds were double.)
Almost immediately, the double-inverse proved a bigger hit than the simple inverse, collecting more assets and racking up larger trading volumes. ProFunds' rival Direxion was able to capitalize on that preference last November by launching three-times funds, that have already pulled in nearly $4 billion from investors, according to data from the National Stock Exchange.
Full Story: http://online.wsj.com/article/BT-CO-20090514-715501.html 
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