Wednesday's Outlook: Not Out of the Woods Yet

Includes: EEM, EFA, EWZ, FXI, IFN, RSX
by: David Fry

<< Back to page 1

A big issue for holders of overseas ETFs in times like these are tracking errors. U.S. markets look forward while index data from 'closed' overseas markets linked is stale. This creates investor confusion and angst. You must accept it as part of the deal.

When markets get wild you can get tracking distortions, particularly intraday, with many of the leveraged inverse and long issues. It must be a supply/demand issue combined with high volatility and investors need to weigh their actions carefully.

Investors who loved the interest rate cuts bought financials, REITs and homebuilders yesterday. Will that last? We’ll see.

It should be an entertaining week. The interest rate cut Tuesday doesn’t impress me particularly since the current level of interest rates isn’t what’s ailing the economy--it’s the horrid level of lousy debt that banks are still sitting on. There’s more bad news on that front to dribble and then gush out. Like I said, Mr. Market hasn’t met Mr. CDS quite yet.

Have a pleasant day.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in: IEF and GLD.