ANOTHER MARKET BUMMER – RSI HAS AN ULTRA + MORE

Today in the market, Tuesday, August 19, 2008: Inflation fears caused another selloff today. This bummer ended with the S&P500 off -0.93% and the Nasdaq down -1.35%. Not a good at all. Let’s face it, this is one nervous market, so use great care and honor your stops.

ETF/CEF Catch a Falling Knife on the Road to Recovery (FKRR):

• DIG - ProShares Ultra Oil And Gas close above $82.00
• ERF - Enerplus Resources Fund above $40.00
• HYB - New America High Incm Fund above $1.52
• VPU - Vanguard Utilities VIPERs above $77.50

ETF/CEF Discussion: I’m rather surprised to see RSI pick an ultra O&G ETF (DIG) today. It might portend an energy revival. That would have very serious implications for the market. The next two picks are income funds. ERF is not considered a CEF, but rather a royalty trust fund that pays a yield of 12.40%. HYB pays 10.40% while the utility ETF, VPU pays out 2.75%.

These are extraordinary times in the economy and market and extraordinary times require extraordinary strategies. So take a look at all the oddball recommendations that RSI has been making.

SELLOFF TODAY - RSI BATS A ZERO

Today in the market, Monday, August 18, 2008: The market sustained a sizeable loss as troubles in the financial sector took its toll. The market was off -1.5% as stocks spent most of the day in negative territory. It is difficult to be positive with all this bad news weighing on investors.

ETF/CEF Discussion:  I’ll make this short and sweet…RSI had no picks today. It did have one CEF pick, but the expense ratio of almost 3%, so I won’t honor it with a mention. I don’t want to encourage bad behavior.  See you tomorrow.

SEESAW DAY ENDS MIXED - RSI GOES CONSERVATIVE

Today in the market, Friday August 15, 2008: The market turned in a mixed performance with a lot of seesaw action. The market was nervous about the slowing economy, crude oil prices, and whatever. The major averages ended mixed; the S&P500 was up +0.41% and the Nasdaq was off a miniscule -0.05%. Today’s action was almost a nonevent to end the week.

ETF/CEF Catch a Falling Knife on the Road to Recovery (FKRR):

• EVG - Eaton Vance Short Duration Diversified Income Fund buy now
• EVV - Eaton Vance Limited Duration Income Fund buy above $13.80

ETF/CEF Discussion: Again, RSI is going the conservative route and picking high yielding closed end funds (CEF).  EVG pay a yield of 8.70% and EVV pays 10.59%. As the chart illustrates, these two are not high flyer, but I think you can buy this dip, gather the monthly dividends and wait for the price recovery. They look as if they can book a 10% or so capital gain. Just a thought.

My apology for posting at such a late hour last night. I try to get this blog out in early evening and rarely do I publish later than 10:00PM Mountain Time (midnight Eastern).  Last night was one of my few exceptions.

While I have been shifting my investing style and emphasis on this blog, I have been putting this methodology to good use in my own personal account.  In the past few weeks I have purchased the following:

BEO - Enhanced S&P 500 Covered Call Fd Inc, 15.10% yield

EVG - Eaton Vance Sht Duration Diversf Incm Fd, 8.67% yield

IGM - iShares S&P GSTI Technology Index Fund

IJJ - iShares S&P Midcap 400 value index Fund

IYW - iShares Trust Dow Jones US Tech Sector

PBW - PowerShares WilderHill Cln Energy Portf

PFN - PIMCO Floating Rate Strategy Fund, 9.14% yield

PIV - PowerShares Value Line Tmlnss Slct Prtfl

PWB - PowerShares Dynamic Lg Cap Gwth Portf

SJT - San Juan Basin Royalty Trust, 10.16% yield

TLT- iShares Tr Lehman 20+ Year Treasury Bd, 4.66% yield

VGT - Vanguard Information Technology ETF

XLK - Technology Select Sector SPDR Fund

XRO - Claymore Zacks Sector Rotation

As you can see, I have invested in ETFs and CEFs that RSI has recently selected. I eat my own cooking, so to speak. Since I am retired, I like to have some of my holdings generate income. Likewise I want portfolio growth to counter the ravages of inflation.  Yes, I did bet on the two “trickery” funds for the reason that I believe the methodology behind the funds will outperform passive index funds. What did I sell in order to purchase these funds? For months I have been lightening up on gold, energy, materials and foreign funds and stocks that have served me well in the past, but whose time has come to an end.

Well that’s it for tonight…have a great weekend.

STOCKS UP NICELY - RSI FAVORS FOREIGN & YIELD + A REIT TALK

Today in the market, Thursday August 14, 2008: Stocks gained today as crude oil prices fell.  Again stocks up when oil down and visa versa. The S&P500 ended up +0.55% and the Nasdaq gained a nice +1.03%.  IBD has proclaimed that we are officially in a market rally, so don’t fight the trend.

ETF/CEF Catch a Falling Knife on the Road to Recovery (FKRR):

• EWW - Mexico iShares close above $55.00
• PFN - Pimco Floating Rate Strategic Fund close above $12.85
• PGJ - PowerShares Golden Dragon Halter USX China Portfolio close above $24.50

ETF/CEF Discussion:

A reader has commented that I should lighten up and add some smiley faces…I will consider his suggestion. Right now I’m tired, it’s late and I want to get on with the mission at hand.

I also have another comment/question form another reader asking about real estate.  Is it a good time to buy?  Here is my cursory answer after I scanned REIT ETF/CEF funds. Domestic real estate funds are in a bottoming process and look to move higher. Foreign/International funds are tanking and it will be some time before they return to normal.  I like RWR - DJ Wilshire REIT ETF which yields 5.04% and VNQ - Vanguard REIT ETF which yields 5.19%.  Both show signs of recovery and have taken off since mid July. You might wait for a pullback before you place a buy order. Lastly there is a CEF that pays a much higher yield and it is RNP - Cohen & Steers REIT & Preferred Income Fund. It yields 12.43% and has pulled back in the past few days.  Buy it at the conclusion of this temporary weakness. Thanks for the question.

Okay, with that said, these three fallen funds (see them far above) certainly have some potential to take advantage of the IBD’s rally.  Mexico and China both have been beaten down and are due for a recovery.  Take a look at these two. The Pimco fund pays a large 9.29% yield and it holds low quality (junk) debt instruments of US companies.  If there is a revival, this could be a smart play…you decide.

STOCKS FALL TO END SLIGHTLY DOWN - RSI LIKES MATERIALS, YIELD & TRICKERY

Today in the market, Wednesday August 13, 2008:  The market fell today on poor retail sector sales news. The close was slightly down with the S&P500 off -0.29% and the Nasdaq -0.08%. Not too bad for these averages.

ETF/CEF Medium Volatility:

• IYM - Basic Matls iShares close above $76.50

ETF/CEF Catch a Falling Knife on the Road to Recovery (FKRR):

• EVV - Eaton Vance Limited Duration Income Fund close above $14.00*
• NCV - Nicholas Applegate Conv&Income Fund close above $11.50*
• PGH - Pengrowth Energy Trust buy now
• PIV - PowerShares ValueLine Timeliness Select Portfolio buy now
• XRO - Claymore/ZAcks Sector Rotation buy now

ETF/CEF Discussion:   Let me start with the trickery first…the last two ETF funds on the list, PIV and XRO, follow an unusual methodology.  They follow a dynamic “index” of sorts, one based on ValueLine timeliness and the other on sector rotation methodologies. Rather “tricky” sort of in indices, eh what?  Anyway, they are interesting methodologies that RSI has selected, but beware. They trade thinly and are not very popular.  Maybe they will catch on with the public, who knows.  We may be seeing more of these kinds of funds. There are several “managed” ETFs coming to market too.  RSI will track them as data becomes available and they have a one year track record.

PGH isn’t either an ETF nor a CEF but it is an energy trust that is currently trading at a 16% yield. Canadian energy trusts have a potential for unfavorable government tax treatments, so do your homework on this one.

Finally the two income funds have quite high yields; EVV 10.51% and NCV 13.72%. Remember, with high yields come high risk.  With that said, they sure beat the heck out of money market rates.

* previously recommended at this buy level

FINANCIAL SECTOR SENDS STOCKS DOWN - ABBREVIATED BLOG

Today in the market, Tuesday August 12, 2008:  Bad news from the financial sector sent the market down today.

ETF/CEF Low Volatility:

• AWF - Alliance Wrld Dlr Govt II close above $12.55

ETF/CEF Catch a Falling Knife on the Road to Recovery (FKRR):

• HYB - New America High Incm Fund close above $1.54

ETF/CEF Discussion: I have to make this brief today…have to run to a meeting this evening.  The two CEF selections pay quite a high yield, so there is a risk premium involved here.  Please do your research and use your own good judgement. 

Catch you tomorrow.

STOCKS CONTINUE TO RISE - RSI SEES SOME RECOVERY

Today in the market, Monday August 11, 2008:  The market continued to build on Friday’s good gains as the S&P500 gained +0.69% and Nasdaq +1.07%.  It could have been better since stocks were much higher at mid-afternoon.  Oil prices had been down most of the day and recovered somewhat near the close which sent stocks down. This seems to be the trend….oil down & stocks up. To me, falling crude oil prices seems to indicate a slowing world economy.  It’s all very counterintuitive. 

ETF/CEF Catch a Falling Knife on the Road to Recovery (FKRR):

• EVV - Eaton Vance Limited Duration Income Fund close above $14.00
• FRA - Blackrock Floating Rate Income Strategies Fund Inc. close above $14.70
• JKH - iShares Morningstar Mid Growth Index Fund close above $91.80
• NCV - Nicholas Applegate Conv&Income Fund close above $11.50
• VOT - Vanguard Mid Cap Growth ETF close above $58.70
• VPU - Vanguard Utilities VIPERs close above $79.00

ETF/CEF Discussion:  RSI didn’t have any picks in the traditional sense, kind of strange for a strong showing today.  The falling knife arena has some interesting themes. Conservative, high yield income CEFs, mid-cap ETFs and now a utility ETF.  They all look quite impressive and I have added several of them to my watch list at the indicated price triggers. While the income funds have high yields, only FRA has a high (2.81%!) expense ratio…too rich for my blood. I like the other income funds at more reasonable expenses. You make that decision for yourself.

I’ve been working outside most of the day pulling dead trees out of the ground and I’m looking forward to a relaxing evening. Catch you tomorrow.

SHARP DROP IN OIL SENDS STOCKS HIGHER - RSI LIKES MID-CAP & TELECOM

Today in the market, Friday August 8, 2008:  The stock market was up strong today as crude oil price drop.  The market ended almost 2 1/2% higher and ended the week with solid weekly gains. All this even with war breaking out between Russia and Georgia.  That takes nerve to be long the market going into a weekend. Certainly a very positive note. Are we seing a recovery here? Time will tell.

ETF/CEF Low Volatility:

• AWF - Alliance Wrld Dlr Govt II close above $12.50
• IJK - MidCap 400 Growth iShares close above $88.00

ETF/CEF Medium Volatility:

• PHK - PIMCO High Income Fund close above $11.75

ETF/CEF Catch a Falling Knife on the Road to Recovery (FKRR):

• IJH - MidCap 400 iShares
• IWP - Russell Mid-Cap Growth iShares
• IYZ - Telecom iShares
• MDY - S&P Midcap SPDRs
• PWJ - Powershares Dynamic Mid Cap GR
• VOX - Vanguard Telecommunication Services VIPERs

ETF/CEF Discussion:

Okay, I’ve added a new twist to some of the picks.  I have qualified some of the buys with “close above $xx.xx” to give you some guidance.  I believe these are good picks if they push up above the target closing price.  Also I’ve modified RSI to narrow its choices to conform to the “Road to Recovery” philosophy that has been applied to the falling knife group.

RSI continues to like mid-cap funds and now has added telecom ETFs to the mix. Let’s cover the two Closed End Funds (CEFs) first.  AWF has a P/Y/E of -10.18/9.25/1.53.  Not too bad, I would buy these numbers.  PHK has a P/Y/E of +9.01/13.00/1.53.  I’m bothered by the +9.01% premium over NAV. If this fund drives back to par, you would lose the premium effectively off the 13% yield to give you a payout of 4%.  Then there is the price appreciation, predicted by RSI. It does have the PIMCO name as a plus, so you decide.

As the two charts show, all the funds have come off there highs and are undergoing somewhat of a price recovery. I like that…it matches the old axiom “Buy cheap and sell dear.”  I trust RSI has found some good funds to match this old adage. 

Have a good weekend.

STOCKS FALL TODAY - RSI STRIKES OUT

Today in the market, Thursday August 7, 2008:  The markets slid on the jobless report and retailers’ sales numbers. The S&P500 was off -1.87% and the Nasdaq was down -1.05%.  Declining issues led advancers 2.6:1. A poor day’s performance.

ETF/CEF Discussion:  There were no ETF/CEF picks today as RSI digested the information and failed to make a selection.  Stay tuned.

STOCKS RISE AS CRUDE FALLS - RSI THEME…MID-CAP RECOVERY

Today in the market, Wednesday August 6, 2008:  The market rose as crude fell today.  The S&P500 rose a meager +0.34% while the Nasdaq was up a respectable +1.21%.  I like this action!

ETF/CEF Medium Volatility:

• EWW - Mexico iShares

ETF/CEF Catch a Falling Knife on the Road to Recovery (FKRR):

• IWP - Russell Mid-Cap Growth iShares
• GAF - SPDR S&P Emerging Middle East And Africa
• PWJ - Powershares Dynamic Mid Cap GR
• VO - Vanguard Mid Cap VIPERs
• VOT - Vanguard Mid Cap Growth ETF
• XRO - Claymore/ZAcks Sector Rotation

ETF/CEF Discussion:  RSI picked only one ETF today with a reiteration of yesterday’s pick, EWW.  I have modified a couple of criteria.  First I’ve added the screen of a minimum market cap of $50 million.  That eliminates the funds that are small enough that they might stop trading and are merged into other funds.  Although this is most unlikely, there are more new funds entering the market every week and there might be an overcrowding.  Secondly I have revised the CFK criteria.  Rather than just be a falling fund, the list has been restricted to those funds that have made headway in their recovery.  So we might want to call them Falling Knives on the Road to Recovery (FKRR).  

Okay, let’s discuss the ETF picks.  We covered EWW yesterday so lets proceed with the FKRR list above.  The predominant theme is that the Mid-Cap sector is on the road to recovery. So here is the opportunity to buy cheap in a beaten down sector. Of course there is the usual disclaimer that there is no guarantee that these funds will outperform going ahead.  Also some of these issues are thinly traded; XRO traded on a volume of 5,498 today. 

So bottom line for me is that I like PWJ the best of the lot.  It has a better behaved chart pattern and I would look to buy it if it can break through $21.75.  In fact I’m placing it on my watch list and when it attains that criteria I will make a decision to buy or not.