How should you do it? Rather than sell economically sensitive U.S. stock ETFs in your mix – possibly subjecting yourself to short-term capital gains or potentially “throwing off” your allocation — you might purchase VXZ with a weighting of 5%-10%.

The downside of doing so is fairly straightforward. VXZ is likely to drift lower if the market moves sideways; it’s likely to sell off sharply if the S&P 500 experienced a parabolic rise from current levels.

Examining the downside risks, the likelihood of the S&P 500 going on a rampage after a 26% jump off the October lows seems somewhat remote. (Even bull markets tend to take “breathers.”) What’s more, the CBOE S&P 500 Volatility Index (VIX) is testing lows that haven’t held up for very long during the 3-year bull market period.

Even if the VIX broke to new lows, and the S&P 500 surged through 1400, iPath S&P 500 VIX Mid-Term ETN (VXZ) would probably be confined to a 10% drawdown from current levels. One can even use a stop-limit loss order to make certain of the outcome.

Now let’s look at the flip side of the coin. Stock assets across the board are technically overbought; Greece could still go awry; Syria and Iran are wild cards; market gains have removed some of the pressure for Europe to act quickly to prevent debt contagion; the U.S. economy is still growing at a pace that is far below trend. (Why else do you think that Bernanke is committed to 0% rates until 2014!)

In a pistachio nut shell, a flare-up is well within the realm of possibility… if not the realm of probability. Even a health-restoring pullback can occur with little-to-no provacation. That’s why a volatility note like iPath S&P 500 VIX Mid-Term ETN (VXZ) may act as a buffer if you’re more actively-inclined.

Over the course of the last year, ”VIX” volatility spiked on three occasions: (1) February tsunami-March “Arab Spring”, (2) August U.S. debt ceiling debate/September Eurozone debt fears and (3) November public referendum disaster by the Greek prime minister. From the low to the highs, VXZ gained 19%, 65% and 26% respectively.

Briefly, then, one might anticipate a 20%+ gain in VXZ during a significant spike in volatility. Moreover, it happened on 3 occasions last year alone, suggesting that the phenomenon is hardly infrequent.

While the small weight in the portfolio will not change your returns dramatically, it may certainly reduce total portfolio losses by 1.5% to 2%. That can be attractive when the world appears to be coming apart at the seams.

Again, iPath S&P 500 VIX Mid-Term ETN (VXZ) is best used as a trading tool… not a buy-n-hold-n-forget-it investment. I would consider VXZ at this particular moment because it is the furthest below its 50-day moving average (14%) at any point during the 3-year stock bull. That’s a seriously ”oversold” ETN in a seriously “overbought” market.

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

Across those 3 events/time frames, VXZ From the high to the lows on the VXZ movement,

Here’s the problem with this sort of simplistic assessment. Some economic bellwethers are cooling off considerably, while certain “fear” indicators have yet to capitulate.

For example, David Penn at Forbes describes the 3-day corrective activity in the popular gauge, iShares DJ Transports (IYT). Its share price on 2/8/2012 is currently trading lower than its closing price on 1/19/2012. In addition, money has yet to exit long treasuries in a manner that might be more indicative of a sustainable bull run. Specifically, iShares 20+Year Treasury Bond (TLT) has held firm to strong support near the 116 level throughout 3 solid months of the superb stock rally.

Trouble In The Transports? – David Penn, Forbes
Investments For Income Lovers – Amanda Tyler, Motley Fool
US Dollar ETFs Dread Greece, Euro, & Fed (UUP, UUPT, UDN, FXE, VGK) – Staff, Wall St. Sector Selector
Fund Fees And The Pimco Effect  - Tom Lauricella, Smart Money
Putting ETF Managed Portfolios In Perspective– Andrew Gogerty, Morningstar    

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

I realize that I am raining on the NASDAQ’s parade, just as the world begins to clamor for IPO shares of Facebook (FB). Perhaps ironically, I see tremendous value in some areas of tech, even at these 11-year highs. That said, one reason to bring up the technology bubble is to examine the current standing of another — the credit bubble.

Financial institutions are struggling to demonstrate profitability and revenue growth due to an inability/unwillingness to lend. Equally damaging, banks holding toxic assets (e.g., securitized subprime mortgages, junk sovereign debt, etc.) have unattractive balance sheets; many investors refuse to go anywhere near bank stock.

Should we really be “talking up” the 30%-plus gains for the SPDR Select Sector Financials (XLF) since early October? Or should we take notice of the reality that XLF is still down a staggering 60% from 5 years ago? Keep in mind, that 60% drawdown will require 150% gains to get back to the starting gate.

Typically, I avoid making “crystal ball” prognostications. Yet debt-to-GDP ratios for industrialized sovereign states as well as the need for developed world households to deleverage will continue to cloud the outlook for banks for years. I see parallels to investor fear of tech stocks after 2000-2002; it has taken a decade for investors to come back to tech with conviction and I wouldn’t expect them to return to financials with conviction until 2017.

Traders? They’re another story. In fact, as much as I prefer to limit common stock exposure to financials, there are several technical signs that may favor traders who are willing to nibble at iShares Europe Financial Sector (EUFN).

For one thing, European banks are finally starting to trust each other again. Since July, I have talked ad nauseum about the ever-climbing 3-month LIBOR. Back in August of 2011, I discussed LIBOR yields rising from 0.25 to 0.29. In September, LIBOR had reached 0.34; 3-month LIBOR hit .40 in October. Heck, it kept right on going through the first week of 2012 to plateau near .58!

Like magic, or quasi-European accord, the rate has steadily dropped ever since the first week of the new year. If 3-month LIBOR rates — the rate European banks charge one another to borrow money — closes below .485, one could readily assume that European financial firms could profit from money-making endeavors (e.g., consumer loans, business loans, etc.).

Secondly, the current price of EUFN is well above a 50-day moving average. I would expect EUFN to pull back several percentage points to potentially test its 50-day on the downside. If EUFN passes the test and bounces higher, a trader could look to capitalize in an environment where 3-month LIBOR rates are trending lower.

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

Consider the fact that the Bureau of Labor Statistics (B.L.S.) lowered the national unemployment rate to 8.3%. If you believe the B.S. (I mean, B.L.S.) report, corporations may be back in the hiring game. Yet the largest seasonal adjustments in employment data come in January, making the month a very poor predictor of future employment patterns.

And that’s not all.

In November, Americans were saving at a 3.5% rate. By December 2011, that number jumped to 4.0%. It follows that an improving labor market by itself may not translate into higher levels of economic activity. What’s more, even with record low mortgage rates, home prices are still pushing lower. If we don’t get a corresponding pop in real estate, we aren’t likely to benefit from the “wealth effect” – a powerful driver of consumption.

The circumstances that many may be overlooking are those in the euro-zone. Specifically, the impact of the debt crisis can’t be minimized by simply assuming that Europe will muddle through a quasi-recession and come up with the money to save its sovereigns or its banks. More likely, debt flare-ups will serve as an excuse for profit-takers and short-sellers.

In other words, if you’re intrigued by fundamentally “undervalued” ETFs like iShares DJ Oil & Exploration (IEO), or if you’re looking for yet another way to get direct exposure to the commodity (oil) itself, you’ll need more clarity from the European Union. That… as well as a price pullback.

Oil ETF Review: CRUD Crushing Competition – Michael Johnston, ETFdb
Corporate Bond War: Quality Trumping Junk (LQD, JNK) – Jon Ogg, 24/7 Wall St.
Top 10 Small-Cap ETFs – Dave Fry, The Street
ETFs Are Going BATS … And Why You Should Care! – Ron Rowland, Money And Markets
The Winning Trade In High Yield Corporate Bonds  - Ploutos, Seeking Alpha     

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

Not surprisingly, many have chosen to wistfully recollect the 90%-plus, since-inception gains for U.S. stocks. Meanwhile, others wisely remind us that substantial corrections of 10% to 20% occurred in each of the 3 years – 2009, 2010, 2011.

Interestingly enough, there have been a number of cat-skinning ways to achieve admirable profits in the period. The Australian dollar via the CurrencyShares Australian Dollar (FXA) picked up 3/4 of the SPDR S&P 500 Trust’s (SPY) upside for roughly 3/5 the beta risk. That’s a pretty good deal for highly correlated assets in the currency “carry trade.”

Of course, the purpose of portfolio diversification isn’t merely to hold investments with disparate amounts of risk. One also endeavors to combine non-correlating assets. In other words, what asset(s) can still move forward in an equity bull that does not have a strong positive relationship with the S&P 500, like the Australian dollar, or a strong negative relationship, like U.S. Treasury bonds?

The most enigmatic possibility out there may be the Japanese yen via the CurrencyShares Yen Trust (FXY). Most regard the yen as a safer haven choice. And yet, over the course of the current bull market, SPY (S&P 500 SPDR Trust) and FXY moved in the same direction 70% of the time; FXY also appreciated by 30% in value.

Perhaps ironically, the relationship over 1 year is such that FXY moved in the opposite direction 70% of the time. Equally baffling, there’s virtually no relationship (non-correlation) over the last 6 months.

Naturally, one can attempt to explain the different periods retroactively. For example, the first leg off the bear market bottom involved asset appreciation alongside the trashing of the U.S. dollar; commodities, foreign equities, small-cap U.S. equities and all foreign currencies thrived. The second leg involved a flight to quality in which large-cap U.S. stocks, the U.S. dollar, U.S. treasuries and the yen were primary beneficiaries.

On 2/2/2012, institutional money rushed out of the CurrencyShares Yen Trust (FXY).  A total of $250M exited the FXY gates on on 13x the normal trading volume. The activity left FXY with roughly 2/3 the net assets under management. Apparently, not everyone is impressed by FXY’s long-term track record as a “diversifier,” or its current status above both the 50-day moving average and the 200-day moving average.

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

Of course, healthy bull markets typically experience pullbacks. And while the methodology for determining when a pullback might arrive differs from analyst to analyst, most would draw similar conclusions about stocks right now; that is, equities are ripe for a sell-off.

In an article below, writers for Bespoke explain that every Country ETF except for Spain (EWP) is “overbought.” Keep in mind, many technical analysts regard an asset as “overbought” when the current price is more than 10% above a long-term 200-day trendline.

What about when a price is more than 10% above a short-term moving average like the 50-day? Run-ups of this magnitude are almost certain to slam into a profit-taking wall. There are a number of Country ETFs that currently possess this dubious distinction, including Austria (EWO), Brazil (EWZ), India (INP), Russia (RSX), South Africa (EWZ) and Sweden (EWD).

Country And International Market ETFs Overbought – Bespoke
Emerging Market Stocks Set To Capture Spotlight In 2012 – Marla Brill, Reuters
How ETFs Save On Fees And Taxes – Tom Lydon, ETF Trends
The Hidden Jewel In ETFs: Bullion – Tom Threlkeld, Bank Investment Consultant
Three Cyclical ETFs That Are Surging Higher– Eric Dutram, Zacks
    

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

The merits of aggregation aside, some governments in specific emerging economies have more ability to stimulate economic activity than others; that is, there are countries that may be able to lower interest rates or enact spending initiatives comfortably, and there are those where debt ratios and/or inflation are too high for fiscal and monetary easing.

In the 1/28/2012 edition of The Economist, there’s a fascinating feature on exactly which countries may have the most wiggle room to ease. The publication devised an index that incorporated inflation, excess credit, real interest rates, currency exchange movement, current account balance, budget balance and government debt. (Note: My preference might have included a grade for political climate as well, but perhaps that might have been too subjective.)

The Economist contends that the resulting “wiggle-room index” offers a rough idea of which emerging economies might be better positioned to deal with economic weakness. It turned out that Indonesia, China, Singapore, Chile and South Korea had the most room of 27 ”emergers” to maneuver on fiscal and monetary policy, whereas Egypt, India and Poland had the least.

How might this information be useful to ETF investors? Below, I laid out the 2011 performance for each country fund as well as the month-over-month performance here in 2012.       

One thing that it is abundantly clear, stocks had already been factoring in which emergers had (have) less room to ease. Indeed, the ETFs for countries with the least maneuverability were brutalized the most in 2011. For example, BRIC components PowerShares China (PGJ) and Market Vectors Russia (RSX) experienced drawdowns of -25.0% and -28.2% respectively. And yet, BRIC components Brazil and India fared even worse, with Brazil (EWZ) plummeting -37.3% India (EPI) shedding -40.5%.

By the same token, the very same countries that currently have little opportunity to prime the economic pump are performing the best out of the 2012 gate. One may get excited about the S&P 500 rising more than 5% month-over-month or one may get really enthusiastic about 12% for Asian stalwarts like South Korea (EWY). On the other hand, the harder Poland (EPOL) and Turkey (TUR) and Egypt (EGT) fell, the larger the 20%-plus jump higher (month-over-month).

In sum, several emerging economies cannot rely on government maneuvering as much as others. Those that cannot rely on policy changes are more prone to the ill effects that eurozone debt contagion has on the entire globe. And, by extension, they are larger beneficiaries of debt crisis resolution.

For most folks, the super-sized rewards of the ”tapped out” grouping isn’t worthy of the risks. In contrast, the majority of wiggle-room contenders reside in Asia. Use stop-limit loss orders for investments is Asian neighbors like South Korea (EWY) and Singapore (EWS).

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

Is this normal? For riskier stocks and “risk-free” treasuries to gain ground in the same month? Not if you believe in historical correlations. Over the previous year, the S&P 500 SPDR Trust (SPY) and the iShares 7-10 Year Treasury Bond Fund (IEF) moved in opposite directions 74% of the time (-0.74 correlation coefficient).

So why is the safety of owning treasury bonds so appealing to some, even as stocks surge ahead? Europe. While many believe emerging markets will continue to grow in spite of inflation, and that the U.S. economy can continue to improve in spite of tepid hiring, eurozone debt contagion remains an uncomfortable wild card.

Blackrock’s Bob Doll, as well as BlackRock’s Matt Tucker, explain that U.S. treasury yields could move even lower if Europe’s debt issues deteriorate. Similarly, U.S. equities would probably pull back.

In contrast, if a more tolerable “fix” gains traction, stocks could hit new 52-week highs and treasury bonds could lose their allure. Longer-term bond maturities may already be showing some signs of weakness; the current price of the iShares 20+ Year Treasury Bond Fund (TLT) has dipped below its 50-day trendline.

Stock, Treasury ETFs Send Mixed Messages On Economy – John Spence, ETF Trends
IShares Rolls Out Seven Single-Country Developed-Markets ETFs On New Exchange– Robert Goldsborough, Morningstar
Emerging Markets Post Bigger Gains Than US So Far – Jeff Cox, CNBC
Believe It Or Not: Greece ETF Surging To Start 2012– Eric Dutram, ETFdb
A Sprott Fund That’s Not– Ana Kostioukova, Index Universe

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

The reasons for the risk-on gains may be easy to identify, from the notion that U.S. economic prospects are improving to the feeling that Europe will contain its debt crisis. Throw in the need for short-sellers to cover their profits in the most beaten down sectors (e.g., alternative energy, metals mining, European financials, etc.), and one’s recipe for a rally is nearly complete.

Going forward, however, one country’s decisions will be more critical than any other. China’s.

Consider the state of world affairs near its most bearish in 2011. What turned the tides… was it the hope that Angela Merkel would mortgage Germany’s future by agreeing to euro-bonds? Did investors believe that the Fed would eventually bail out Europe with the purchase of Spanish or Portuguese debt? In truth, the first spaghetti to stick on the Wall was the mid-September rumor that China might buy Italian bonds.

Of course, China doesn’t just hold the key to debt crisis containment. The world’s second largest economy is the primary driver of global economic growth.

Last year, Chinese officials were busy taming the inflation dragon with tighter banking policies. Leaders steadily raised bank reserve requirements as well as interest rates, causing commodity prices as well as resources-rich nation ETFs to plummet.

This year, though, China’s leadership has shown an increasing willingness to lower bank reserve requirements and/or refrain from additional rate hikes. The result?

Theoretically speaking, reversions to average P/Es should be enough to stoke a fire for equities. That said, we’ve already seen stocks trade for 440-plus consecutive days below 50-year average P/Es. It follows that we’re far more likely to see stocks get a lift from evidence of a “soft” economic landing in China as well as any decisions China may make to keep Europe from the abyss.

Regarding the former, Goldman Sachs Group Inc. and JPMorgan Chase & Co. both believe that China is likely to buy less copper in the next few months. What’s more, China’s January PMI may show economic contraction when it is released tomorrow. If that is the case, and if China officials continue to wait on potential rate/bank reserve easing, stock assets would have an enormously difficult time climbing higher.

With respect to eurozone debt, China doesn’t necessarily need to act as Europe’s financial savior for stocks to move higher. Yet China’s involvement will be crucial. Nobody knows this reality more than German Chancellor Angela Merkel who heads to Beijing on Thursday. On the agenda? Merkel may push for greater commitment to the International Monetary Fund (IMF) by China as well as a Merkel speech on the eurozone crisis to the Chinese Academy of Social Sciences.

Will China eventually lower rates and bank reserve requirements to stimulate its economy? Will China become more engaged in the eurozone debt crisis? Checking the price movement for SPDR S&P China (GXC) will give you insight into what the markets themselves think. Greater certainty would be reflected by an ability to climb above and stay above the 200-day long-term trendline.

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

Bespoke Research Group points out that forward guidance has been equally disconcerting. By analyzing the spread between the percentage of corporations raising guidance (expectations) minus those that are lowering expectations, they calculate the spread at -3.3. Simply put, more are lowering their forecasts for profits and revenue than raising their forecasts.

That said,  is it a foregone conclusion that the negative spread means bad things for Stock ETFs? After a calendar year when Vanguard Total Stock Market (VTI) gained a paltry 1% (primarily through reinvested dividends) and iShares Russell 2000 (IWM) logged -4.5% in losses?

Perhaps one might look at the lowering of guidance outside of a vacuum. For one thing, stocks earned respectable 9%-10% in 2004, in spite of 3 consecutive quarters of a “negative spread.” Secondly, price-to-earnings ratio (P/E) valuations haven’t traded above their 50-year average for 446 consecutive days… a feat not seen since the Nixon presidency. It follows that with earnings growth topping 15% and stocks flat-lining in 2011, earnings deceleration to a more modest 8% in 2012 could still help P/Es reverse course and stocks surge.

Uh-Oh — Guidance Dips Too – Bespoke
Don’t Tap Germany Through The Bund Fund – Charles Sizemore, Investor Place
Beyond XLY: Considering Consumer Discretionary ETFs – Michael Johnston, ETFdb
Gold ETF Performance And Outlook– Christian Magoon, Seeking Alpha
Stealth Demand In 10 Year Treasury Futures– Scott Pluschau, ETF Digest
    

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.