Now that the dust has settled on the annual Russell rebalance, let’s take a closer look at the shiny new indexes and see what they say about the market.

The total-market Russell 3000 Index has seen some sizable changes in its sector weightings, although the top 10 remain very much the same. Figure 1 shows the new 2009 sector weightings according to the Russell sector classification system. Not surprisingly, financial services is no longer the largest sector: It now takes second place to technology, which is weighted at 16.19% versus financials at 15.27%. In 2008, those sectors were reversed, with financials at 17.24% and tech at 14.19%.

 

Figure 1: Russell 3000 Sector Weights In 2009 & 2008

Sector

2009

2008

Technology

16.19%

14.19%

Financial Services

15.27%

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The Russell indexes will go through an annual reconstitution tomorrow, June 26 which could add volatility to an otherwise normally quiet Friday summer session.

For a schedule of the annual reconstitution process go to the Russell indexes page (here). 

The annual reconstitution is a process wherein the Russell indexes are completely rebuilt to ensure that all market segments are accurately represented.  This rebuilding affects the Russell Global, Russell 3000, Russell 1000, Russell 2000, Russell Midcap, and Russell Microcap indexes. 

There are 430 changes in the Russell 3000 with 276 additions and 154 deletions.   Sectors most affected is the healthcare with a net addition of 52 stocks and energy with a net decrease of 14 stocks.  The financial sector leads both the list of additions (69) and deletions (-39). 

Here is the link to view the stocks affected by the

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ProShares is requesting approval to launch ETFs that would provide 3X leverage to the S&P 500.

 

The world's more recognized investable blue-chip index could be getting triple-leverage coverage for the first time.

ProShares has filed to launch an exchange-traded fund seeking to provide 300% of the daily returns of the S&P 500 index. It's also requesting approval from the Securities and Exchange Commission for a new ETF that would give investors 300% short exposure of the index.

Both would have expense ratios of 0.95% and trade on the NYSE exchange. Earlier this year, ProShares filed to offer 3X leverage with 94 new ETFs. But in that April filing, no mention was made of the S&P 500. (See related story here.)

Currently, ProShares offers the Ultra S&P 500 ETF (NYSE: SSO). But that provides 200%, or 2X, the daily returns of its benchmark. It also has the UltraShort S&P 500 ETF (NYSE: SDS), which

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Toronto-based adviser taking advantage of rally to sell high-flying stocks and buy more of his favorite bond ETFs and DFA funds.

 

Mike Bayer considers himself a contrarian investor.

In the past few months, as stock markets soared, that sort of go-against-the-grain approach has taken center stage.

The Toronto, Canada-based adviser and president of Strategic Analysis Capital Management says he prefers to buy exchange-traded funds and mutual funds from Dimensional Fund Advisors when they’re out of favor.

“The problem most investors have is that they tend to trade too frequently and make changes in the wrong direction. They’re buying high and selling low,” said Bayer, who works with individual and institutional clients in Canada and the United States.

Since early March, SACM has been taking advantage of the rally in stocks to rebalance client portfolios. Bayer has been trimming positions in the Vanguard Emerging Markets Stock ETF (NYSE: VWO).

“Emerging markets have had a big run-up in

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SAM Flexible Income A (SAUPX) was incepted in July 1996. The investment seeks to provide a high level of total return, consisting of reinvestment of income with some capital appreciation.

The fund operates as a fund of funds and invests principally in underlying funds. It may invest up to 40% of assets in any single fixed-income fund as well as cash equivalents, no more than 30% of its net assets in equity funds, and may invest up to 30% of the assets in any single equity fund.

The fund offers dividends quarterly and capital gains annually. It has an expense ratio of 0.67%.

LargeCap Growth I A (OMSOX) seeks long-term growth of capital. The fund mainly invests in equity securities of companies with market capitalizations within the range of Russell 1000 Growth index.

The fund normally focuses on companies with an above-average rate of

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I spent part of this morning sorting through the May fund flow numbers to see if any new patterns showed up in terms of where investors were putting their new money to work.

You can access the full report here. The data is from the National Stock Exchange.

There’s a lot of interesting information in the latest report, including a complete table showing assets and inflows by ETF provider. Of all the data points covered, however, one in particular caught my eye.

So far this year, the Direxion Financial Bear 3x ETF (NYSE: FAZ) has attracted the second-greatest inflow of any ETF on the market, at $4.6 billion. Only the SPDR Equity Gold (NYSE: GLD) has done better, pulling in $11.8 billion.

Despite the massive inflows, FAZ ended May with just $1.6 billion in assets. Such a gap suggests that investors in the fund have experienced terrible returns.

And they have.

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For the first time in over a year, the Dow is actually challenging the 200-day moving average. Adding two new components to the Dow may provide the boost needed to break above this significant trend line. Would such a break, however, mean that the worst is over, or is another collapse still possible?  It doesn’t happen often, but when it does; it’s kind of a big deal – changes to the Dow Jones (NYSEArca: DIA).

Those changes, however, are becoming more frequent. On September 22, 2009, Kraft Foods (NYSE: KFT) replaced American International Group (NYSE: AIG).

Ever since then, the Dow has been underweighted in financials. The reduced financial exposure explains why the Dow has performaned better than the S&P 500 (NYSEArca: SPY), over the past year or so. The Financial Select Sector SPDRs (NYSEArca: XLF) were the worst performing sector, up until the

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There has been much talk about an economic recovery lately. Without analyzing WHETHER a recovery is even validated, the focus of attention has shifted to the actual shape of a recovery. Rather than getting caught up by wishful thinking, we actually bothered to take a look at the big picture. Sooner or later, the missing link in the above chain of reasoning will become painfully obvious…..

Those who fail to learn from history…

This bear market has often been compared to the 1972-1974, or 1980-1982 bear. The 80’s bear was fairly shallow with a 27% decline in the S&P 500 (NYSEArca: IVV). The 70’s bear did send the S&P 500 tumbling by 48%.  So far, the current bear market has melted the Dow Jones (top to bottom) 55%. This exceeds the 70’s and 80’s bear, and makes them unsuitable for comparison purposes.

The

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Leveraged exchange traded funds are clearly not for everyone, especially if you are of the buy-and-hold mind-set. But claims that these feisty newcomers threaten to ignite extreme market volatility don’t quite add up.

This particular brand of ETF is designed to give short-term traders leveraged long or short exposure to a variety of indexes.

The Direxion Daily Large Cap Bull 3X Shares (BGU), for example, seeks to replicate 300% of the daily performance of the Russell 1000 Index. On the short side, the UltraShort QQQ ProShares (QID) offers traders exposure to twice the inverse of the daily performance of the Nasdaq 100 Index.

Although the basic concept has been around as a niche mutual fund strategy since 1994, the ETF version emerged in 2006 and is quickly gaining appeal.

So much appeal, in fact, that some critics are jumping to the conclusion

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Think building an exchange-traded funds portfolio is complicated? It turns out you could do a lot worse than just buying the 10 biggest ETFs.

Sounds too easy, right? But take a look. Using data as of March 31, the 10 largest ETFs by assets were:

 

Top 10 ETFs By Assets Fund

Ticker

Assets

SPDR Index 500 SPY $57,952 SPDR Equity Gold GLD $33,500 iShares MSCI-EAFE EFA $24,099 iShares MSCI-Emerging Markets EEM $21,266 iShares S&P 500 IVV $14,743 PowerShares QQQ QQQQ $12,339 iShares Barclays TIPS TIP $11,588 iShares Barclays Aggregate AGG $9,740 iShares iBoxx Corp Bond LQD $9,395 iShares Russell 1000 Growth IWF $8,426 Source: NSX. Data as of 3/31/09. Assets are in $US millions.

 

If you took an equal position in

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