On the week, 21 of 26 categories ended up.  Of these 21 categories, 17 ended up at least 1%, with the largest gains seen in Russia, Latin America, and China.  Of those 5 categories that were in the red, only 2 were down more than 0.3% - short funds, on the wrong end of the market this week, and real estate funds, still plagued by the on-going subprime and rate worries.

    It's interesting as well to note that the categories with the highest correlation to the S&P after retail were Russia and MSCI.  Those with the lowest correlations after short funds were currency, convertible, and call-write funds, as is typically the case.

Dollar-Weighted Category Return

Dollar-Weighted Category Return

    Wednesday saw continued outflows with 24 of 26 categories trading down, bringing 14 of 26 categories to red for the past week.  The worst percentage losers for the day were Latin America, emerging markets, and Europe, all trading down over 2%.  Dollar-weighted European ETF returns are now nearly break-even for the past month.  Note as well the incredible 97% correlation between the Latin American ETF returns and the S&P 500 over the last week.  I would avoid Latin American ETFs as alternatives to US markets right now if you're looking for diversification.

    Those categories that were significantly less negative than the rest of the market are convertibles, call/write, commodities and resources, and Japan, as had been seen in Tuesday's market summary.  Given the possibility of a market down-turn, I would most favor the writer funds, as selling calls is pure profit in falling markets.

    The only two categories up were currency ETFs, just by a hair, and short ETFs.  This week's US data, combined with the ECB tick and strong Australian data, has accelerated the dollar depreciation trend.  As the dollar loses strength, watch for increased downside risk in transports, utilities, and Asian funds.