Finishing 2010 On A Strong Note

By December 23, 2010Weekly Writeup

Honestly, how can anyone be disappointed with the progress of their portfolio in 2010? If you’ve been following my guidance here at ETF Risk Alert, you sidestepped summertime trouble and you profited handsomely from both domestic trends as well as emerging market trends.

I wouldn’t expect much in the way of fireworks between now and year-end. The next round of “worry” probably won’t surface until January, where profit-taking and “sell-the-strong-earnings-news” might be the name of the game. Of course, only time will tell.

For now, all indications are positive. The CBOE Volatility Index (VIX) remains well below a 50-day moving average. Meanwhile, the current prices for SPDR S&P 500 Trust (SPY) and Vanguard Emerging Markets (VWO) are well above respective trendlines.

VIX 50

SPY 50

VWO 50

Keep in mind, window dressing money managers often go shopping before Christmas time. Specifically, advisers have a limited number of trading days left to acquire investment positions that will look good on quarterly and/or annual portfolio summaries.

Individual superstar companies whose share prices rocketed earlier in the year experience the most attention. For instance, is anyone surprised to see Apple (AAPL) hitting record after mind-boggling record?

Exchange-traded funds with the highest relative strength percentile rankings gained the most ground in the trade-shortened week. They significantly outperformed the competition over the last 5 trading days. Even more noteworthy, with most stock ETFs taking a breather on Thursday, these favorites kept right on winning.

Which ETFs currently possess magnificent momentum? Mining ETFs and Oil Exploration ETFs.

Window Dressing ETFs
          Approx 1-Day   Approx 5-Day
PowerShares Small Cap Energy (XLES)   0.54%   4.44%
SPDR Metals and Mining (XME)     0.09%   3.21%
SPDR Oil Gas Exploration (XOP)     0.04%   3.19%
iShares Oil & Gas Exploration (IEO)   0.14%   3.08%
iShares DJ Materials (IYM)     0.42%   2.85%
First Trust Global Copper (CU)     0.43%   2.71%
Global X Silver Miners (SIL)     0.39%   1.10%
S&P 500 SPDR Trust (SPY)     -0.14%   1.15%
Powershares Nasdaq 100 (QQQQ)   -0.26%   0.49%


Granted, as long as the Fed and other central banks are “reflating” through loose monetary policy, materials ETFs like Market Vectors Coal (KOL) and energy ETFs like SPDR Oil & Gas Equipment Services (XES) will thrive. (Review “5 Stock ETFs For The 2011 Global Economy.”)

By the same token, it is China that determines just how high the reflation trade ETFs can climb; that is, if China decides it needs to tighten its monetary and fiscal screws to prevent an inflationary bubble, the reflation trade ETFs could see significant price depreciation.

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