Net ETFs Sink, Defensives Slide

March 20, 2001
Loren Fleckenstein

It was more of the same
for the Qubes and the tradable Net funds Tuesday, which headed lower as the Fed
did the expected by cutting the fed funds and discount rates by a half point.
The finance-focused exchange-traded funds fared poorly as well.

This is perfectly understandable.
The 50 basis point cuts still left official rates higher than short-term market
rates. The Fed remains behind the curve.

The defensive ETFs
continued to break down as well. This, too, makes sense, if we’re in the late
stage of this bear market. In the early stages of a bear, money tries to stay in
stocks by seeking out supposed defensive stocks. But ultimately, bears end up
taking down just about everything, as money leaves even the so-called defensives
for the safety of cash.

I continue to keep an eye
on the CBOE put-call ratio. In the past, durable bottoms have come on climax
market sell-offs that dramatically expanded the put-call ratio well above 1. On
Tuesday, the ratio ended at a complacent 0.61. Everyone is still trying to pick
a bottom here.Â

The Nasdaq 100 Tracking
Stock
(
QQQ |
Quote |
Chart |
News |
PowerRating) fell 7.4%, the day’s biggest loss among the ETFs.Â

If you’re new exchange-traded funds,
be sure to visit TradingMarkets’ Knowledge Center,
dedicated to explaining the basics of trading and active investing in ETFs and
mutual funds. Just click on the Funds tab
near the top of this page, then click on the Knowledge
Center tab.Â

Net ETFs Sink, Defensives Slide

BUY THE FEAR, SELL THE GREED

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