Price momentum usually slows before prices reverse direction.
Three days up is sufficient for a minor counter-trend correction. Price indexes already have recovered normal fractions of the previous week’s losses.
The S&P 500 Composite (SPX, 1,175.38) rose 12.43 points or 1.07% on Tuesday, September 27, 2011.
SPX opened on an upside gap above the highs of the previous 3 trading days. SPX added to gains into a peak at 2:13 p.m. ET before reversing in late trading to close below the open and below the range midpoint. This moderate reversal could be the first sign of a change in the short-term bull/bear struggle.
Sentiment has been bearish, implying the presence of shorts available for covering. This was evident until Tuesday afternoon.
Minor upside reversals against the dominant bear trend lure short-term traders into trying to trade a bounce. Minor price corrections against the trend are normal and expected, of course, but playing counter-trend bounces is risky. The mood can switch from “risk on” to “risk off” overnight, leaving the too-clever trader suddenly holding the bag, as we have seen repeatedly over the past 7 weeks. And in a Dow Theory Primary Tide Bear Market, the big surprises come to the downside.
A Dow Theory Primary Tide Bear Market is a powerful beast that must not be underestimated.
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Includes Top Ten ETFs, Major Trend Relative Strength Rankings, charts, support and resistance levels, and much more.
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9 major U.S. stock sectors ranked in order of long-term relative strength:
Utilities (XLU) Neutral, Market Weight. The Relative Strength Ratio (XLU/SPY) rose above the highs of the previous 25 months on 9/23/11, reconfirming a major uptrend. Absolute price rose above 3-year highs on 9/20/11, signaling a major uptrend. Support 32.40, 29.45, 27.91, 27.44, and 25.76. Resistance 34.72, 34.89, and 36.24.
Consumer Staples (XLP) Neutral, Market Weight. The Relative Strength Ratio (XLP/SPY) rose above the highs of the previous 25 months on 8/22/11. Absolute price fell below the lows of the previous 6 weeks on 9/22/11, confirming a short-term downtrend. Price fell below 10-month lows on 8/9/11, confirming a longer-term downtrend. Support 28.07, 28.04, 27.76, 27.63, 27.46, 26.34, 25.30, and 24.95. Resistance: 31.14, 31.86, 31.92, and 32.46.
Technology (XLK) Neutral, Market Weight. The Relative Strength Ratio (XLK/SPY) rose above the highs of the previous 9 years on 9/23/11, and that is RELATIVELY bullish. Absolute price is bearish: price is below its falling 50-day SMA and 200-day SMA. Support 23.00, 22.47, 21.60, 20.01, and 19.51. Resistance 25.29, 25.54, 26.88, 27.09, 27.43, 27.63, and 28.60.
Health Care (XLV) Neutral, Market Weight. The Relative Strength Ratio (XLV/SPY) rose above the highs of the previous 18 months on 9/22/11, reconfirming a major uptrend. Absolute price fell below the lows of the previous 4 weeks on 9/22/11, confirming a short-term downtrend. Price fell below 11-month lows on 8/9/11, confirming a longer-term downtrend. Support 29.64, 28.00, and 27.49. Resistance 33.75, 34.54, 35.79, 36.12, 36.57 and 37.89.
Consumer Discretionary (XLY) Neutral, Market Weight. The Relative Strength Ratio (XLY/SPY) rose to a new high on 9/23/11. Absolute price fell below the lows of the previous 4 weeks on 9/22/11, confirming a short-term downtrend. Price fell below 10-month lows on 8/9/11 confirming a longer term downtrend. Support 33.99, 33.42, 33.11, 32.66, 31.70, 29.80, 28.64, 28.21, and 26.62. Resistance 38.23, 40.10, and 41.78.
Industrial (XLI) Bearish, Under Weight. The Relative Strength Ratio (XLI/SPY) fell below the lows of the previous 19 months on 9/22/11, reconfirming a major downtrend. Absolute price also is in a long-term downtrend: price fell below 12-month lows on 9/22/11. Support 29.65 and 27.67. Resistance 32.89, 35.05, 35.22, 37.35, 38.43, and 39.97.
Energy (XLE) Bearish, Under Weight. The Relative Strength Ratio (XLE/SPY) fell below 10-month lows on 9/23/11, reconfirming a major downtrend. Absolute price fell below 10-month lows on 9/26/11, confirming a major downtrend. Support 57.95, 53.71, 50.33, 48.56, 46.16, and 43.66. Resistance 69.65, 70.45, 80.97, 83.27, and 91.42.
Materials (XLB) Bearish, Under Weight. The Relative Strength Ratio (XLB/SPY) fell below 2-year lows on 9/23/11, reconfirming a major downtrend. Absolute price fell below the lows of the previous 2-years on 9/26/11, reconfirming a major long-term downtrend. Support 29.81, 29.43, and 27.67. Resistance 34.85, 35.92, 36.37, 40.20, 40.72, 41.28, 43.04, 45.21, 45.21, and 46.54.
Financial (XLF) Bearish, Under Weight. The Relative Strength Ratio (XLF/SPY) fell below the lows of the previous 2-years on 9/21/11, reconfirming a major long-term downtrend. Absolute price fell below the lows of the previous 2-years on 9/22/11, reconfirming a major long-term downtrend. Support 10.83, 9.41, and 5.88. Resistance 13.48, 14.48, 15.41, 15.70, 15.89, 16.01, 16.46, 16.75, 16.85, 17.20, and 17.87.
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Stock Market Indicators
NASDAQ Composite/S&P 500 Relative Strength Ratio rose above previous 10-year highs on 9/23/11 reconfirming a long-term uptrend. This means a long NASDAQ Composite and short S&P 500 hedge has been a winning trade. NASDAQ absolute price turned bearish, falling below 50-day and 200-day SMAs, on 9/20/11.
iShares MSCI BRIC Fund (BKF) Relative Strength Ratio (BKF /SPY) fell below 29-month lows on 9/22/11, reconfirming a major long-term downtrend. This basket of the stocks of Brazil, Russia, India and China is in a relatively bearish major trend.
Emerging Markets Stocks ETF (EEM) Relative Strength Ratio (EEM/SPY) broke down below 29-month lows on 9/22/11, reconfirming its preexisting bearish major trend. Absolute price broke down below 14-month lows on 9/22/11and remains bearishly below falling 50- and 200-day SMAs.
Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) broke down below 7-year lows on 9/19/11, reconfirming its preexisting bearish major trend. Absolute price broke down below 14-month lows on 9/22/11 and remains bearishly below falling 50- and 200-day SMAs.
The Largest Cap S&P 100/S&P 500 Relative Strength Ratio (OEX/SPX) rose above 50-day and 200-day SMAs on 9/21/11, which is a RELATIVELY bullish sign for the short term trend of the Ratio. Longer term, OEX/SPX fell below 28-year lows on 5/26/11, reconfirming its preexisting bearish major trend.
The Small Cap Russell 2000 Index/Large Cap Relative Strength Ratio (IWM/SPY) fell below 13-month lows on 9/21/11, reconfirming a major downtrend. Absolute price has been weak since 5/2/11, broke down below 12-month lows on 9/22/11, and remains below falling 50- and 200-day SMAs.
The S&P Mid Cap 400/Large Cap Relative Strength Ratio (MDY/SPY) fell below the lows of the previous 6-weeks on 9/22/11, confirming a bearish minor trend. MDY/SPY fell below the lows of the previous 10-months on 8/8/11, confirming a bearish major trend.
Advisory Service Sentiment: There were 37.6% Bulls versus 39.8% Bears as of 9/21/11, according to the weekly Investors Intelligence survey of stock market newsletter advisors. The Bull/Bear Ratio was 0.94, up from 0.87 the previous week, which was the lowest level since August, 2010, more than 1 standard deviation below the 20-year average. The 20-year median is 1.56 and the mean is 1.64.
VIX Fear Index remains stuck in its 7-week, relatively high level trading range, from a low of 30.16 to a high of 48.00. VIX is a market estimate of expected constant 30-day volatility, calculated by weighting S&P 500 Index CBOE option bid/ask quotes spanning a wide range of strike prices for the two nearest expiration dates.
The Dow Theory signaled a Primary Tide Bear Market on 8/2/11, when both the Dow-Jones Industrial Average and the Dow-Jones Transportation Average closed below their closing price lows of June, 2011.
The S&P 500 Composite (SPX, 1,175.38) rose 12.43 points or 1.07% on Tuesday, September 27, 2011.
S&P 500 Cash Index Potential Resistance
1576.09, high of 10/11/2007
1552.76, high of 10/31/2007
1523.57, high of 12/11/2007
1498.85, high of 12/26/2007
1440.24, high of 5/19/2008
1406.32, high of 5/29/2008
1381.50, Fibonacci 78.6% of 2007-2009 range
1370.58, high of 5/2/11
1359.44, high of 5/10/11
1356.48, high of 7/7/11
1347.00, high of 7/21/11
1258.07, low of 6/16/11
1249.05, low of 3/16/11
1246.73, high of 12/13/10
1238.81, Fibonacci 78.6% of 1,576.09 high
1235.05, high of 12/7/10
1234.56, low of 8/3/11
1232.85, low of 12/16/10
1228.74, Fibonacci 61.8% of 2007-2009 range
1230.71, high of 8/31/11
S&P 500 Cash Index Potential Support
1101.54, low of 8/9/2010
1091.15, low of 9/7/2010
1039.70, low of 8/27/10
1039.31, Fibonacci 23.6% of June-Aug. 2010 range
1010.91, low of 7/1/2010
1008.55, Fibonacci 38.2% of 2009-2010 range
991.97, low of 9/2/2009
978.51, low of 8/17/2009
956.23, high of 6/11/2009
943.29, Gann 50.0% of 2009-2010 range
878.04, Fibonacci 61.8% of 2009-2010 range
874.17, Gann 62.5% of 2009-2010 range
869.32, low of 7/8/2009
805.17, Gann 75.0% of 2009-2010 range
785.13, Fibonacci 78.6% of 2009-2010 range
666.79, intraday low of 3/6/2009
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Fixed-Income Investments
Bond, iShares Barclays 20+ Year U.S. Treasury ETF (TLT) price fell below 2-day lows on9/26/11, signaling nothing more than a minor pullback. TLT rose above all-time highs on 9/22/11, reconfirming a major uptrend. Support 118.58, 111.25, 106.08, 103.20, 102.27, 96.31, 94.83, 93.14, 89.65, and 88.14. Resistance 123.87.
Bond, iShares Barclays 7-10 Year U.S. Treasury ETF (IEF) price fell below 2-day lows on9/26/11, signaling nothing more than a minor pullback. IEF rose above all-time highs on 9/22/11, reconfirming its preexisting major uptrend. Support 105.00, 103.55, 102.50, and 102.38. Resistance none.
Junk/Investment-Grade Corporate Bond ETFs Relative Strength Ratio (JNK/LQD) remains bearish according to my objective 50/200 SMA system. JNK/LQD fell below 6-week lows on 9/22/11, confirming a bearish trend for the short term. JNK/LQD fell below 2-year lows on 8/10/11, confirming a bearish trend for the long term.
U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year ETFs Relative Strength Ratio (TIP/IEF) remains bearish according to my objective 50/200 SMA system. TIP/IEF has been weak since peaking on 4/8/11 and fell below 13-month lows on 9/22/11. This bearish trend means that fixed-income investors have been choosing the unprotected 7-10 Year U.S. Treasury Note ETF (IEF) over the inflation-protected TIPs. So, fixed-income investors may be more worried about deflation than inflation.
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Tangible Assets, Commodities
U.S. dollar ETF (UUP) price rose above the highs of the previous 7 months on 9/22/11, reconfirming a major price uptrend. After the collapse of gold and the Swiss Franc, the U.S. dollar is the last refuge for risk-averse investors. Support 21.94, 21.75, 21.56, 21.42, and 20.84. Resistance 22.63.
Agriculture, PowerShares DB Agriculture Fund ETF (DBA) price fell below the lows of the previous 10 months on 9/23/11, reconfirming a major long-term downtrend.
Crude Oil, United States Oil ETF (USO) price broke down from a Bearish Rising Wedge pattern on 9/19/11, thereby signaling renewed bearish momentum. USO fell below the lows of the previous 2-years intraday on 9/26/11 before reversing to close higher on the day. Still, a new low confirms a long-term major downtrend. Support 33.55, 33.25, 32.60, 31.45, 30.31, 26.28, 22.74. Resistance 35.08, 35.14, 39.25, 40.74, and 45.60.
Gold, SPDR Gold Shares ETF (GLD) price broke down below 9-week lows on 9/26/11,confirming a downtrend, for the short term at least. Gold rose above all-time highs on 9/6/11, reconfirming its preexisting major uptrend. Support: 154.10, 153.61, 147.19, 143.97, 143.42, and 142.55. Resistance: 170.32, 177.40, and 185.85.
Gold Mining Stocks ETF/ Gold Shares ETF Relative Strength Ratio (GDX/GLD) whipsawed back below its falling 50-day SMA on 9/22/11 and remains below its falling 200-day SMA. GDX/GLD fell below 29-month lows on 8/8/11, confirming a bearish major trend for the long term. Absolute price of GDX is neutral; it has not been as bullish as GLD. Investors still prefer Gold bullion over Gold Miners.
Silver, iShares Silver Trust ETF (SLV) price broke down below the lows of the previous 7 months on 9/26/11, confirming a bearish major trend for the long term. SLV fell back below its 50-day SMA on 9/19/11 and fell below its 200-day SMA on 9/22/11. Support 26.03 and 24.44. Resistance: 34.51, 40.23, 41.49, 42.30, 42.78, 44.71 and 48.35.
Silver/Gold ETFs Ratio (SLV/GLD) broke down below the lows of the previous 10 months on 9/23/11, reconfirming a bearish major trend for the long term.. SLV/GLD has been mostly weak since peaking on 4/28/11. This means investors prefer Gold over Silver.
Copper, iPath DJ-UBS Copper TR Sub-Idx ETN (JJC ) fell below the lows of the previous 14 months on 9/26/11, reconfirming a major price downtrend. Weakness in Copper suggests doubts about the economic outlook, while strength in Copper suggests confidence.
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Spotlight on event stocks: Here is a stock screen I designed to pick out potential event stocks, both Bullish and Bearish. Sometimes, stocks with large changes in price and volume are revealed to be deal stocks, sooner or later, or are the subject of some other extraordinary events, positive or negative.
Bullish Stocks: Rising Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
5.98% , PSTL , Steel Global PS ETF, PSTL
2.78% , IXG , Financials Global LargeCap Value, IXG
4.99% , FEU , Value LargeCap Euro STOXX 50 DJ, FEU
1.46% , PXQ , Networking, PXQ
3.71% , FEZ , Euro STOXX 50, FEZ
4.49% , PXN , Nanotech Lux, PXN
2.58% , ADRU , Europe 100 BLDRS, ADRU
0.73% , UTH , Utilities H, UTH
5.60% , HOLX , Hologic, Inc., HOLX
1.33% , VGT , Info Tech VIPERs, VGT
4.47% , RIMM , RESEARCH IN MOTION LTD
7.35% , ATI , ALLEGHENY TECH
6.56% , SHLD , SEARS HOLDINGS
2.78% , TUR , Turkey MSCI iS, TUR
4.15% , THD , Thailand MSCI iS, THD
1.42% , IXC , Energy Global, IXC
3.56% , PIC , Insurance, PIC
4.95% , BHH , Internet B2B H, BHH
2.85% , FLEX , Flextronics International Ltd
1.90% , IYJ , Industrial LargeCap Blend DJ US, IYJ
2.76% , JKK , Growth SmallCap iS M, JKK
2.34% , SCZ , Small Cap EAFE MSCI iS, SCZ
4.26% , JNS , JANUS CAPITAL
2.88% , PGJ , China LargeCap Growth G D H USX PS, PGJ
6.41% , CIEN.O , CIENA
5.65% , ROK , ROCKWELL AUTOMAT
2.02% , ADRD , Developed 100 BLDRS, ADRD
5.41% , ININ , Interactive Intelligence ININ
2.26% , IGV , Software, IGV
3.20% , CTB , COOPER TIRE
4.23% , ODP , OFFICE DEPOT
3.90% , BF.B , BROWN FORMAN STK B
2.49% , IWO , Growth SmallCap R 2000, IWO
Bearish Stocks: Falling Price and Rising Volume
Ranked by Price Change * Volume Change
% Price Change, Symbol, Name
-6.27% , WAG , WALGREEN
-4.27% , AM , AMER GREETINGS STK A
-1.10% , HHH , Internet H, HHH
-1.36% , PWER , POWER ONE
-2.10% , BBY , BEST BUY
-2.23% , SNI , Scripps Networks Interactive
-4.32% , NBR , NABORS
-1.20% , FDO , FAMILY DLR STRS
-1.46% , DYN , DYNEGY
-1.39% , RIG , TRANSOCEAN
-2.45% , AMZN , Amazoncom Inc
-1.22% , AIV , APT INV MNGMT
-1.34% , DOG , Short 100% Dow 30, DOG
-1.48% , PTEN , Patterson-UTI Energy Inc
-0.77% , ACE , ACE
-0.69% , RTH , Retail H, RTH
-1.01% , PSQ , Short 100% QQQ, PSQ
-2.28% , DLTR , Dollar Tree Stores Inc
-0.78% , MJN , Mead Johnson Nutrition
-0.82% , KEY , KEYCORP
-2.37% , LSI , LSI LOGIC
-1.03% , COF , CAPITAL ONE FNCL
-0.90% , NE , NOBLE
-0.34% , AZO , AUTOZONE
-2.92% , FHN , First Horizon National
-1.14% , ZION , ZIONS
-0.81% , AET , AETNA
-0.94% , WPO , Washington Post
-1.44% , LEN , Lennar Corp. (LEN)
-1.19% , USB , US BANCORP
-0.32% , LQD , Bond, Corp, LQD
-0.78% , MRVL , MARVELL TECHNOLOGY
-1.35% , SUN , SUNOCO
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One-Day Ranking of Major ETFs, Ranked from Strongest to Weakest of the Day:
% Price Change, ETF Name, Symbol
5.54% Indonesia MV, IDX
5.07% China 25 iS, FXI
4.99% Sweden Index, EWD
4.71% Silver Trust iS, SLV
4.15% Thailand MSCI iS, THD
4.11% South Korea Index, EWY
4.03% France Index, EWQ
3.82% Austria Index, EWO
3.65% Malaysia Index, EWM
3.64% Germany Index, EWG
3.49% EMU Europe Index, EZU
3.36% India PS, PIN
3.35% Taiwan Index, EWT
3.19% Emerging Markets, EEM
3.18% India Earnings WTree, EPI
3.16% Italy Index, EWI
3.15% Emerging VIPERs, VWO
3.14% Chile MSCI iS, ECH
3.11% Australia Index, EWA
3.01% Russia MV, RSX
2.97% Europe 350 S&P Index, IEV
2.93% Oil Fund PowerShares, DBO
2.89% Netherlands Index, EWN
2.88% China LargeCap Growth G D H USX PS, PGJ
2.86% Oil, Crude, U.S. Oil Fund, USO
2.82% Belgium Index, EWK
2.78% Turkey MSCI iS, TUR
2.77% South Africa Index, EZA
2.73% Singapore Index, EWS
2.70% Metals & Mining SPDR, XME
2.68% European VIPERs, VGK
2.62% Global ex US ACWI iS, ACWX
2.60% Emerging 50 BLDRS, ADRE
2.51% Pacific ex-Japan, EPP
2.49% Growth SmallCap R 2000, IWO
2.47% EAFE Index, EFA
2.47% Silver Miners Global X, SIL
2.41% Growth EAFE MSCI, EFG
2.38% Value EAFE MSCI, EFV
2.34% Small Cap EAFE MSCI iS, SCZ
2.33% Mexico Index, EWW
2.32% United Kingdom Index, EWU
2.20% Basic Materials DJ US, IYM
2.17% Hong Kong Index, EWH
2.15% SmallCap Russell 2000, IWM
2.15% Spain Index, EWP
2.15% Growth BARRA Small Cap 600, IJT
2.15% Pacific VIPERs, VPL
2.14% Growth SmallCap VIPERs, VBK
2.14% Water Resources, PHO
2.08% Materials SPDR, XLB
2.08% SmallCap S&P 600, IJR
2.04% Brazil Index, EWZ
2.03% Switzerland Index, EWL
2.01% Global 100, IOO
2.00% Capital Markets KWB ST, KCE
1.98% Value SmallCap S&P 600 B, IJS
1.95% Small Cap VIPERs, VB
1.94% Gold Shares S.T., GLD
1.91% Latin Am 40, ILF
1.90% Value SmallCap Russell 2000, IWN
1.88% Canada Index, EWC
1.88% Financial Preferred, PGF
1.83% Semiconductor iS IGW, SOXX
1.80% MidCap S&P 400 SPDRs, MDY
1.77% Bond EmrgMkt JPM iS, EMB
1.76% Industrial SPDR, XLI
1.75% Microcap Russell, IWC
1.74% Networking, IGN
1.74% Value MidCap S&P 400 B, IJJ
1.73% Value SmallCap VIPERS, VBR
1.71% MidCap S&P 400 iS, IJH
1.69% Commodity Tracking, DBC
1.65% Growth MidCap Russell, IWP
1.64% Growth MidCap 400 B, IJK
1.60% Japan Index, EWJ
1.59% Transportation Av DJ, IYT
1.58% Semiconductor SPDR, XSD
1.53% Health Care SPDR, XLV
1.52% Dividend International, PID
1.46% Energy SPDR, XLE
1.46% Energy & Nat Res iS GS, IGE
1.46% Energy DJ, IYE
1.44% Energy VIPERs, VDE
1.43% MidCap Russell, IWR
1.42% Dividend SPDR, SDY
1.42% Energy Global, IXC
1.35% LargeCap Blend S&P=Weight R, RSP
1.35% WilderHill Clean Energy PS, PBW
1.33% DIAMONDS (DJIA), DIA
1.33% Info Tech VIPERs, VGT
1.29% Growth 1000 Russell, IWF
1.28% Technology SPDR, XLK
1.27% LargeCap Blend Russell 3000, IWV
1.26% Blend Total Market VIPERs, VTI
1.26% Value LargeCap Dynamic PS, PWV
1.26% Biotech SPDR, XBI
1.26% Technology DJ US, IYW
1.24% Value VIPERs, VTV
1.23% Dividend Appreciation Vipers, VIG
1.23% Value 1000 Russell, IWD
1.21% Value MidCap Russell, IWS
1.19% Growth S&P 500/BARRA, IVW
1.16% Telecom DJ US, IYZ
1.15% LargeCap 1000 R, IWB
1.13% S&P 500 iS LargeCap Blend, IVV
1.12% S&P 500 SPDRs LargeCap Blend, SPY
1.11% LargeCap VIPERs, VV
1.11% Dividend High Yield Equity PS, PEY
1.10% Growth VIPERs, VUG
1.09% Preferred Stock iS, PFF
1.09% Dividend DJ Select, DVY
1.07% REIT Wilshire, RWR
1.06% Real Estate US DJ, IYR
1.05% LargeCap Blend S&P 100, OEF
1.04% QQQ Nasdaq 100 Trust, QQQ
1.03% Value S&P 500 B, IVE
1.01% Homebuilders SPDR, XHB
0.99% REIT VIPERs, VNQ
0.98% Realty Cohen & Steers, ICF
0.70% Frontier Markets Guggenheim , FRN
0.68% Consumer Discretionary SPDR, XLY
0.68% Financial DJ US, IYF
0.66% Financials VIPERs, VFH
0.60% Consumer Staples SPDR, XLP
0.58% Agriculture DB PS, DBA
0.49% Financial SPDR, XLF
0.49% Utilities VIPERs, VPU
0.36% Utilities SPDR, XLU
0.25% Bond Ex-US Treas, BWX
0.18% Bond, TIPS, TIP
0.12% Bond, High-Yield Corporate, HYG
-0.02% Bond Treasury Short-Term iS, SHV
-0.02% Financial Services DJ, IYG
-0.04% Bond, 1-3 Year Treasury, SHY
-0.04% Bond Muni ATM-Free S&P iS, MUB
-0.14% Bond, Aggregate, AGG
-0.16% Bond, High-Yield Junk, JNK
-0.32% Bond, Corp, LQD
-0.67% Bond, 10 Year Treasury, IEF
-1.53% Bond, 20+ Years Treasury, TLT