ETF Expert

Right now, it’s difficult for me to focus on anything other than the Lakers-Celtics Game 7 Finals match-up. Can KobeCo win back-to-back games as well as back-to-back titles? Or will the sheer grit of Boston’s Three Party (Rondo makes “Four”) overwhelm the favorites?

Yet I digress. Fortunately, I am quite capable of motivating myself to focus on the world of market-based securities.

It’s important, then, to consider the subtle shift that may be taking place since the monstrous surge higher on June 15. That was the day that the S&P 500 SPDR Trust (SPY) climbed back above its 200-Day trendline.

Consider Wednesday’s disheartening news from bellwether Fed Ex. The company’s forecasts were hardly the stuff of bullish dreams… and yet stocks managed green arrows by the closing bell. The S&P 500 also held above its 200-Day MA support.

That said, since stock markets are discounting creatures that reflect what will happen (a.k.a. guidance) versus what has taken place (a.k.a. prior quarter’s earnings), why was the FedEx “warning” shrugged off? There was greater certainty about BP’s future and stabilization in the Eurozone.

Fair enough. Yet what about the disappointments on Thursday’s news-wires. Jobless claims rose yet again… to 472,000. Ouch! Meanwhile, Philly manufacturing via factory employment contracted for the first time in seven months.

Granted, the market’s have pulled back… but it’s different. Where’s the VIX volatility spikes above 30? And can we credit the euro dollar’s gains for helping U.S. stocks to find trendline support for the S&P 500 SPDR Trust’s (SPY)?

If I were a betting man, I’d bet on the Lakers to win the Thursday night finale handily. But I’m not a betting man… and the game could easily go either way.

Taken one step further, if I were a betting man, I’d be inclined to view stocks favorably going into earnings season. The low volume and lower volatility suggest that hedge funds have already positioned themselves with 10%-15% cash in their portfolios. Meanwhile, money managers, mutual fund managers, and individual investors are likely scrambling to get into what is “hot” before quarter’s end. (Think Apple as it hits all-time highs.)

Yet, once more, I am not a betting man. As the chief investment officer for a Registered Investment Adviser, I must evaluate the risk-reward relationship of each decision. And I must protect each decision with stop-limit loss orders or protective hedges or offsetting non-correlating assets.

So here’s the dilemma. We may get a bounce to close out the “series” known as the 90 days of Q2. Yet corporate guidance will either push the cyclical bull forward or it will revitalize the dancing bears. And there’s simply no way to get a comprehensive feel for the collective sentiment of CEOs on Q3 and Q4 business prospects beforehand.

If you like Apple, and tech in general, PowerShares Nasdaq 100 (QQQQ) carries a 15% Apple weighting. If you buy, simply plan for the circumstances under which you would sell.

Moreover, don’t pass up an opportunity to explore foreign stock ETFs. Thailand (THD) and Indonesia (IDX) have both defied the global downturn in equities, due in large part to their exposure to financial institutions believed to have excellent balance sheets.

My personal favorite in the emerging market realm today… it’s actually iShares MSCI Malaysia. (EWM). The fund is primarily diversified across financials, industrials and consumer stocks, with virtually no exposure to the more volatile energy and basic materials segments.

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