Dynamic Growth ETF Portfolio
NEW BUYS:
None
NEW SELLS:
None
SWITCHES:
None
Here are our Top 10 ETF's for the week of August 12th:
1) SHY: iShares Lehman 1-3 Year Treasury Bond Fund- 1.254
2) IAH- Internet Architecture HOLDRs Trust-.533
3) ITA- iShares DJ Aerospace & Defense-.522
4) AGG: iShares Lehman Aggregate Bond Fund- .508
5) IXP: Telecommunications Sector Index Fund- .463
6) PGJ: PS Golden Dragon China Fund- .461
7) FXA: CurrencyShares Australian Dollar Trust- .451
8) EWS: iShares MSCI Singapore (Free) Index Fund-.448
9) DND: Wisdom Tree Pacific Ex-Japan Total Dividend- .418
10) VOX: Vanguard ETF Telecommunication Services- .371
Charts on our top 10 ETF's- See Charts
Honorable Mentions (Holds):
DIM: Wisdom Tree International Mid-Cap Dividend- .265
EWM: iShares MSCI Malaysia (Free) Index Fund-.372
Here are our Top 10 Fidelity Sector Funds for August:
1) FSESX- Energy Services
2) FWRLX- Wireless
3) FSENX- Energy
4) FSTCX: Telecom
5) FBSOX: IT Services
6) FSCSX: Computers & Software
7) FCYIX- Industrials
8) FSDAX: Defense & Aerospace
9) FSNGX- Natural Gas
10) FSPTX- Technology
Honorable Mentions (Holds):
FDFAX: Consumer Staples
FSCHX: Chemicals
The Week in Review
Buckle your seat belts and get ready for a volatile week! The stock market re-tested it's prior lows in this correction cycle, but we have yet to see the capitulation phase. Capitulation usually occurs with a sharp sell-off at the beginning of the day, followed by a reversal that ends with the market registering big gains at the close.
While I think that most of the damage is done, we could see another day or two of selling before the market mounts a comeback. In short, I believe that this week will bring the capitulation that we have all been waiting for.
The Great OZ Has Spoken
Why? During the past two days, the European Central Bank (ECB) pumped €155.85 billion ($214.56B) into the system, the U.S. Federal Reserve injected $59 billion, and other central banks around the world added billions, too. This flood of new capital is allowing the central banks to bailout the banking system without having to lower short-term interest rates. This is very important.
By injecting massive amounts of capital into the system, and not lowering rates, the U.S. dollar can begin to firm and the fed can continue its fight against inflation. This is very positive for the financial markets.
Prior to central bankers injecting liquidity, many hedge funds were forced to sell good stocks to raise cash for mistakes made in their portfolios. Now that the fed has stepped in and thrown them a life jacket, many high quality stocks that were sold will be bought back. This in turn will cause a huge rally in the stock market.
If you currently own any of our recommended market hedges, we suggest that you take your profits on those positions this week. They are the inverse funds on the S&P (SDS), Dow 30 (DXD), and the Nasdaq (QID).
For those of you who would like to play the markets eventual recovery, you may want to consider some of these supercharged bull funds by ProShares; S&P (SSO), Dow 30 (DDM), and Nasdaq (QLD). I would only buys these when the S&P breaks below 1400, or the Dow reaches the 13,000-12,800 level.
My downside target for the current correction remains around the 12,800 level. I never wait on "the bottom" before re-entering the market. Of course, dollar cost averaging in is the best way to build positions in your portfolio. Now that the central bankers have injected liquidity into the financial system, the odds of a greater than 10% correction seem remote.
The most attractive sectors for value investors are the financials, energy, homebuilders, REIT's, and select retailers. Many high quality bank stocks are now sporting dividend yields of 5-6%.
Two weeks ago we raised our allocation to the stock market by 5%. If the DJIA drops to the 13,000- 12,800 mark and/or the SPX to 1400, we will automatically raise our allocations by another 5%.
For now, we are content with an asset allocation of;
65% Equities: (Normally 95%) Aggressive
55% Equities: (Normally 80%) Moderately Aggressive
45% Equities: (Normally 60%) Moderate
25% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative
At DJIA 13,000-12,800/ SPX 1400
70% Equities: (Normally 95%) Aggressive
60% Equities: (Normally 80%) Moderately Aggressive
50% Equities: (Normally 60%) Moderate
30% Equities: (Normally 40%) Moderately Conservative
15% Equities: (Normally 20%) Conservative
