Market Review – Mutual Funds On The Cutline – Updated as of 7/29/2011

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Indications of a deal to raise the debt ceiling had the futures market soaring prior to Monday’s opening. Well, the euphoric rebound actually happened, but it turned out to be short lived, as the major market ETFs staged a 180 degree reversal, only seen 10 times since 1985, and a steep sell off ensued.

It was simply a violent display of volatility, as the S&P 500 plunged through its 200-day moving average of 1,285. Thanks to bottom fishing, the indexes recovered, with the
S&P 500 closing back above this dividing line between bullish and bearish territory. It could have been a lot worse, as a weak manufacturing report took the starch out of a solid opening rebound.

The overall downtrend of the past week made its mark on the mutual fund cutline table as many funds continued to slip. Due to data unavailability, the following cutline report is updated through Friday, July 29th.

This week, there are 442 funds located above the cutline and 427 below it. I am showing the first 250 on the bullish side and the first 100 on the bearish side:

Take a look:

The market’s directional uncertainty is continuing, right now with a downward bias, and I believe it’s best to let things settle down before making new commitments. While my international TTI (Trend Tracking Index) has already moved into bear market territory, the domestic one may very well follow, if momentum continues to deteriorate.

Let’s wait and see how Friday’s jobs report plays out and affects the markets. Just because some mediocre agreement has been reached on increasing the debt ceiling does not mean all is well. Economic data continues to slip and slide and may very well have enough power to end this bull market unexpectedly.

Be prepared to exit your positions, should your trailing sell stops get triggered.

Quick reference to recent issues:

7/26/11 issue

7/19/11 issue

7/12/11 issue

7/5/11 issue

6/27/11 issue

6/20/11 issue

6/13/11 issue

6/6/11 issue

5/30/11 issue

5/23/11 issue

5/16/11 issue

5/9/11 issue

5/2/11 issue

4/25/11 issue

4/18/11 issue

4/11/11 issue

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