After overcoming October's rough start, the major ETFs booked
solid gains in a month full of as much political drama as
follows tradition this year, investors can look forward to a
strong November, which historically kicks off the best six months
of the year for the S&P 500 and Dow and the best eight months
for the Nasdaq.
SPDR S&P 500 (
) added 5% in October and 23% year to date.PowerShares QQQ (
), tracking the 100 largest nonfinancial stocks on the Nasdaq,
also climbed 5% and a remarkable 27% year to date.
SPDR Dow Jones Industrial Average (
) rose 3% in October and 19% for the year. SPY and QQQ marched to
new highs nearly every day the second half of the month after the
government shutdown ended.
Bullish Earnings Reports
At the same time shares of blue-chip tech companies --Google (
) andAmazon.com (AMZN) -- soared upon surprising third-quarter
estimates. With nearly two-thirds of all S&P companies having
reported Q3 results, nearly seven in 10 companies have exceeded
expectations, according to Thomson Reuters.
Stocks retreated from record highs after the Federal Reserve
announced Wednesday it's standing pat on its easy money policies
after a two-day meeting. Waning trading volume overall indicates
may be running out of gas. The most recent Investors Intelligence
report shows bullish sentiment has reached levels last seen in
April 2011 shortly before the market fell 20%, while volatility
indicators shows extreme confidence, said Kathy Boyle, president
of Chapin Hill Advisors in Westchester, N.Y.
In light of lowered earnings forecasts, she believes the
market is overpriced and has more downside potential than upside.
In addition, the market has risen for 523 days without a 10%
The current streak is the longest since the 2003-07 rally, in
which the S&P 500 went 1,673 days without a 10% pullback,
according to Bespoke Investment Group in Harrison, N.Y.
Nick Atkeson, partner at Delta Investment Management in San
Francisco with nearly $9 billion in assets under management, says
the S&P may have overheated in rising about 7% over the past
16 trading sessions.
But his firm's Delta Market Sentiment Indicator shows the
market is decidedly bullish, given that about 75% of the 3,600
stocks it tracks trade above their 75-day moving average. The
indicator registers a sell signal when half of that universe
falls below their 75-day line.
IShares MSCI EAFE (EFA), tracking developed foreign markets,
climbed 3% to a five-year high, pushing its year-to-date gain to
16%, owing outperformance in Spain, up 9%, and Italy, up 11%.
Among all nonleveraged ETFs,Global X FTSE Greece 20 ETF (GREK),
up 18%, ascended the leaders' list.
Countries at the heart of Europe's debt crisis benefited most
from easy global central-bank policies but their economic
problems will persist for years, said Benjamin Segal, co-manager
of Neuberger Berman International Equity , with $1.2 billion in
assets under management.
IShares MSCI Emerging Markets (EEM) rose 4%, paring its
year-to-date loss to 4% , driven primarily by a turnaround in
India's stock market.