How To Beat A Market That Is Trending Lower

THE FINAL NUMBERS - ADIOS 2nd QUARTER

NEWS: The markets closed the last day of the quarter on a mixed note with the Dow and S&P 500 holding onto small gains and the NASDAQ and Russell 2000 continuing the slide. The Dow was up a mere 3 points when the closing bell rang after being up over 80 points earlier in the day. The S&P added one point after being up double-digits. The NASDAQ took a big hit from the start to the finish, ending down 22 points or 1.0% at the lowest level in two months.

THE BOTTOMLINE: The last day of the quarter will typically involve high volatility because investors and managers shift around their holdings and that is what we saw today. The last 10 minutes were very disappointing after the indices held up well for the majority of the session. Let’s hope that July can start fresh tomorrow with the overhang of the financials and surging oil prices. That being said, I need to see a base built by this market before I condone putting new money to work in stocks.

THE DAILY ETF UPDATE - HOW TO BEAT THIS MARKET

NEWS: After two of the worst back to back quarters for the Dow in the history of the market, how were the ETF Bulletin newsletter portfolios able to stand their ground? Diversification and patience would be my answer. Take a look at the year-to-date numbers.

THE BOTTOMLINE: Two of the three portfolios are in negative territory this year, BUT they are doing much better than their benchmarks and with what we consider less risk. The beauty about the portfolios is that there is not an overabundance of trading that takes place to beat the market. As a matter of fact, this year there have been 4 sells and 3 buys in the Moderate Portfolio. The key to short-term success in the market is discipline. Your strategy (we implement the PFG Top-Down Approach to our ETF portfolios) will not always work, but if it can continue to produce solid long-term results you are ahead of the crowd. So when your strategy begins to falter and you consider changing your approach to the market, it is time to step away from the markets and let you emotions move back into equilibrium.

McCALL’S CALL - FIRST HALF WINNERS/LOSERS

NEWS: With the major indices all down over 10% in the first half of the year it was easy to find losers and with the commodities hitting highs it was not too hard to find some big winners. The question is, where were you investing?

WINNERS:

Metals & Mining Sector - The SPDR S&P Metals & Mining ETF (XME) rose 38%.

Energy Sector - The Canadian Oil Sands ETF (ENY) rose nearly 25% this year.

Chemical Sector - The agriculture chemicals burst onto the scene, led by Chile’s SQM, exploding for a gain of 165%.

Coal Stocks - The rise in oil has investors looking at alternatives; DJ US Coal Index up 76%.

Bargain Shopping - Wal-Mart (WMT) rose 20% and Big Lots (BIG) nearly doubled in the first six months as investors moved down a notch on the retail scale.

Commodities - From oil to natural gas to corn to wheat, commodities were the place to be.

LOSERS:

Financials - No big surprise here, Citigroup (C) lost 43% in the first half.

Leisure - Who is going on vacation with gas above $4; MGM Mirage is down 60% at a new 2-year low.

Autos - GM [[gm]] and Ford [[f]] were too late to the hybrid game and are now on the verge of bankruptcy!

Bear Stearns - Need I say more?

Mortgage - Anything that has to do with insuring mortgages (Ambak (ABK) down 95%) or handing out mortgages (WaMu down 63%).

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