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Wednesday's Biggest ETF Winners And Losers

By Trang Ho, INVESTOR'S BUSINESS DAILY
Posted 05/30/2012 02:46 PM ET


Investors flocked to safety in the greenback and bonds as global markets resumed selling off Wednesday.

The dollar, as tracked by the PowerShares DB US Dollar Index Bullish (UUP), flew 0.56% to a 16-month high, while the euro skidded to a two-year low amid ongoing eurozone debt woes. China doesn't feel it needs to inject massive stimulus to stabilize growth and calm investor fears about global financial crisis, Reuters reported policy advisers as saying.

Treasuries soared to their highest levels of the year as 10-year bond yields fell 11 basis points — or 0.11% — to 1.52%, a 60-year low. Prices and yields move in opposite directions.

Vanguard Extended Duration Treasury Index ETF (EDV) and Pimco 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ) both vaulted 4% to outperform all nonleveraged ETFs.

Bonds are extremely overbought and may have topped, says Tom McClellan of the McClellan Market Report.

"But that condition of having topped does not necessarily mean that prices have to go down right away," he wrote in his daily newsletter. Based on his timing indicators, he believes bonds will fall as the stock market rallies in June.

Commodities

IPath Pure Beta Nickel ETN (NINI) and iPath Pure Beta Cotton ETN (CTNN) led the sell-off in commodities, crashing about 10% each. IPath Pure Beta Cocoa ETN (CHOC) melted 8%.

Commodities have been in a bear market since last spring and have fallen more than 30% from their March 2011 peak. They may bottom in between June and July, forecasts Shawn Hackett, president of Hackett Financial Advisors in Boynton Beach, Fla.

"Once that low is in place, commodities can get a bounce. Cotton fundamentals remain dreadful, so any bounce there would be short lived," he said. "Cocoa has very bullish fundamentals, so a rally there would be more sustainable."

Market Overview

SPDR S&P 500 (SPY) plunged 1.4% Wednesday. Energy stocks, which are heavily dependent on economic growth, led the sell-off.

SPDR Dow Jones Industrial Average (DIA) sank 1.25%.

PowerShares QQQ (QQQ), a basket of the largest 100 nonfinancial stocks on the Nasdaq, skidded 1.3%.

SPDR S&P 500 found support at 130 on May 17. It could rally in the short term as investor sentiment — a contrarian indicator — hit its lowest level since October 2011, according to Simon Maierhofer of ETFGuide.com.

"A word of caution: If stocks can't stage a rally from current prices or the 1333-1340 range on the S&P 500 ($133 to $134/share for SPY) despite such bearish sentiment, they have a propensity to fall hard," Maierhofer wrote in his June newsletter. "A drop below 1330 for the S&P ($133.00 for SPY) will be a signal to go short with a stop-loss just above."

IShares MSCI EAFE Index (EFA), tracking developed foreign markets, and IShares MSCI Emerging Markets Index (EEM) both gapped down 2%.

 

 

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