ETF Expert

For the U.S. domestic markets, the current rally began on Tuesday, March 10. The S&P 500 SPDR Trust (SPY) climbed an astonishing 6% off of the "March lows" that have faded from many people's memory.

(S&P 500 closing at 676… and hitting intra-day, devilish lows of 666. Remember that!)

Surprisingly, many pundits seem to think that the remarkable upswing only met resistance here in the 3rd week of June. The truth, however, may be a bit more unsettling.

In fact, the S&P 500 stampeded like a bull for 8 consecutive weeks, hitting 907 on May 4. That marked an astonishing 34% rise off the closing low. Yet the next 6 weeks have left the popular S&P 500 benchmark essentially flat at 910.

8 weeks up… 6 weeks sideways. Granted, the S&P 500 has spent more time at the higher end of the 6-week range (879-955). Nevertheless, we're smack in the middle of that trading range as I type.

Have things been any different for the emerging markets? Vanguard Emerging Market ETF (VWO) garnered an astonishing 52% from $19.75 to $30 in those first 8 weeks. Still, for the most part, VWO also traveled sideways over the last 6 weeks; while it has journeyed in a much wider range between $29 and $34 per share, it is only 4% higher ($31.1) than it was 6 weeks ago.

Developed Europe in the iShares S&P Europe 350 Fund (IEV) over the previous 6 weeks? The pattern is remarkably similar.

A bullish prognosticator would describe the last 6 weeks as a bull market breather. They'd suggest that minor corrections and periods of sideways movement are to be expected.

In contrast, a bearish forecaster would describe the first 8 weeks as a classic, bear market head-fake. They'd suggest that the oversold rally ended in early May, and that the recent deterioration in both domestic and foreign markets are only the start of bad things to come.

So whose crystal ball is accurate?

In reality, nobody knows. There are far too many variables at play. That said, there's another possibility that few commentators are talking about. I'm referring to the possibility of a summertime slumber.

For instance, there's more money sidelined in money markets than at any moment in history (except for a few months ago). Individual investors, money managers and fund managers are exceptionally eager to "get back some of their losses" by putting the money to work. Investment dollars will inevitably look to buy on dips at the lower end of trading ranges and/or at a 10%-15% discount off recent highs hit.

At the same time, there's enough economic uncertainty, risk aversion, hedge fund shorting and systemic concern to keep everyone on their toes. The markets may go up, down and around for much of the summer, only to wind up at about the same place they are today at the end of September.

Indeed, the fourth quarter of 2009 (Q4) could be the make or break period for the equity asset class; that is, at that time, the markets themselves will have a pretty firm grasp on whether recoveries are for real.

Look for income production in the near-term if you don't believe capital appreciation is there for the taking. And in the medium-term, foreign funds have the greenest shoots of all.

If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "live" or via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.