The Fidelity China Region Fund and the Spartan Long Term Treasury Bond Fund Show the Best Relative Strength in the Aftermath of the Market Sell Off

Yesterday, the sharp stock market sell off spooked many investors. Several equity sectors were down more than 2% and the selling was broad-based. The cause of the sell off was a combination of mixed signals about the U.S. economy and the increase of geopolitical risks in Argentina, the Ukraine and the Middle East.

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While equities closed lower again today, the late afternoon rally increased the likelihood of the return of a more stable market next week. The Fidelity China Region Fund (FHKCX) held up the best during the sell off and may continue to do so should the equity sell of resume in September. The FHKCX chart shows that the strong bullish trend is still intact and the relative strength vs. the S&P 500 continued to increase during the sell off.

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Treasury bonds often serve as safe haven in volatile markets. It is widely expected that interest rates will rise in the near future, which should cause the price of long-term Treasury bonds to fall, not to rise. Consequently, a continued bull market for Treasuries may serve as a cautionary signal for equity investors (see Spartan Long Term Treasury Bond Fund chart below). Also, we are approaching the seasonally weak September-November period when most of the market crashes occurred. Taken together, the market action should caution investors to steer away from high risk investments until conditions stabilize.

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Buy and sell signals for Fidelity funds are available at FidelitySignal.com

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Market Correction: Treasury Bond Fund is Trending Higher; Biotechnology Sector is at Oversold Levels and May See a Bounce Next Week

We noted in in the March 26 blog article that the sector rotation has intensified as we approach the seasonally weak April-May period. In the last two weeks the stock market sell off continued, which negatively impacted most equity mutual funds.

Long-term interest rates have also started to decline, which benefits the Fidelity Spartan Long-Term Treasury Bond Fund (FLBIX). The chart below shows the inverse correlation of FLBIX and interest rates (see $TYX, the 30-year Treasury Bond Yield Index on the top panel).

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The biotechnology sector corrected the hardest in recent weeks. However, technical indicators show now that we have reached an oversold condition and a bounce is likely in the coming week:

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Source: FidelitySignal.com

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Equity Markets Rally on the Announcement of the Fed’s QE3 Tapering Decision; Higher Yields Cause Treasury Bonds to Continue Bear Market

Well, it finally happened. The Fed announced today that it will start reducing its Quantitative Easing (QE3) program by tapering the bond purchases from $85 to $75 billion a month, starting in January 2014. The Fed also reassured investors that it will keep interest rates low for the foreseeable future.

The stock market reacted positively: the Fidelity Spartan 500 Index Fund made a new all-time high today and almost all equity funds closed up. The notable exception is the gold mining sector that continues its bear market.

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The announcement pushed the yield on the 10–year treasuries higher, which in turn caused the Fidelity Spartan Long-Term Treasury Bond Fund (FLBIX) to go lower. We would continue to avoid investing in FLBIX until this long-term trend reverses.

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Buy/sell signals for Fidelity funds are available at FidelitySignal.com

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Another Spike in Bond Yields Pushes Treasury Bond Fund Even Lower

Fidelity Spartan Long-term Treasury Bond Fund (FLBIX, last change: -3.21%)

Fidelity Spartan Long-term Treasury Bond Fund (FLBIX, last change: -3.21%)

 

Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

The best Fidelity mutual fund of 2011

The Fidelity Spartan Long-term Treasury Bond fund (FLBIX, change: 2.96%) regained its bullish momentum today. FLBIX is up 26.4% year-to-date, which makes it the best performing Fidelity mutual fund so far in 2011.

The Fidelity Spartan Long-term Treasury Bond fund (FLBIX, change: 2.96%) regained its bullish momentum today. FLBIX is up 26.4% year-to-date, which makes it the best performing Fidelity mutual fund so far in 2011.

 

Mutual fund screens and buy/sell signals are provided by FidelitySignal.com    

Stomach-churning market volatility continues today

The Federal Reserve announced “Operation Twist” today, a plan to lower interest rates by buying long-term treasury bonds. The stock market reacted to the news in the afternoon with across the board selling. The clear winner of the day was the Fidelity Spartan Long-Term Treasury Bond fund.

Fidelity Spartan Long-term Treasury Bond (FLBIX, change: 2.56%)

Fidelity Spartan Long-term Treasury Bond fund (FLBIX, change: 2.56%)

No stock market sector was immune to the news with several sectors loosing more than 5% in a single day! The funds with the largest losses were the energy services, the automotive and the real estate sectors funds. The market conditions continue to be extremely dangerous for equity investors.

Fidelity Select Energy Service (FSESX, change: -5.57%)

Fidelity Select Energy Services fund (FSESX, change: -5.57%)

Fidelity Select Automotive (FSAVX, change: -5.22%)

Fidelity Select Automotive fund (FSAVX, change: -5.22%)

Fidelity Real Estate Investment fund (FRESX, change: -5.17%)

Fidelity Real Estate Investment fund (FRESX, change: -5.17%)

Mutual fund screens are provided by FidelitySignal.com