Fed Spooks Wall Street And Reverses Morning Rally

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

As the chart above shows, a morning rally got derailed in a hurry with the major indexes ending the session to the downside. A positive ADP report got things started in a northerly direction with the S&P 500 knocking on the 2,400 level. Data showed that 263,000 workers were added in March, which was higher than the expected number of 187,000 and also the largest addition since December 2014.

That was the green light for stocks to head higher, and the Dow jumped nearly 200 points. Suddenly, the Fed turned on the cold shower via its latest minutes delivering warning sound bites like you’d think you never hear from them explaining that “it was focusing not so much on inflation or employment, but was seeking to deflate what even “some members” of the FOMC agree is a stock bubble, warning that stock prices are “quite high”, and warning that its forecasts face “downside risks” if “financial markets were to experience a significant correction.”

Further adding:

“A few participants attributed the recent equity price appreciation to expectations for corporate tax cuts or to increased risk tolerance among investors rather than to expectations of stronger economic growth. Some participants viewed equity prices as quite high relative to standard valuation measures.”

And then this:

… a number of participants remarked that recent and prospective changes in financial conditions posed upside risks to their economic projections, to the extent that financial developments provided greater stimulus to spending than currently anticipated, as well as downside risks to their economic projections if, for example, financial markets were to experience a significant correction.

It took a while for traders and computer algos to digest these clearly defined warnings before things went south. The good thing was that the markets were “saved” by the closing bell. It is not often that we see Fed speak of such clarity, and we’ll have to wait and see if there is more fallout to come or if this initial reaction was an outlier.

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Another Successful Dump And Pump

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

In a repeat from yesterday, the early market dump gave way to the usual pump to ensure that the major indexes closed in the green as it appeared that the BTD (Buy the Dip) crowd was out in full force. The Dow managed to kiss its 50-day M/A for the second day in a row and successfully used it as a springboard to eke out a small gain for the day.

Across asset classes, the retail sector (XRT) got clobbered again and lost -0.91%; the 10-year Treasury yield inched higher by +0.43% and oil gained +1.71% on news that inventories are allegedly seen declining. The dollar index was mainly flat throughout the session but closed slightly higher and remains above its psychologically important 100 level.

Precious metals gained again with gold now honing in on the 1,260 mark. Overall, things were slow on Wall Street with all eyes being on the upcoming China meeting, Friday’s payroll report followed by the start of the earnings season next Monday.

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Grinding Back To The Unchanged Line

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

Two things pulled the rug out from early positive momentum at the opening. One, disappointing March auto sales, which should not have come as a surprise given the gigantic slip in retail sales including some 3,500 announced store closings, and two, the topic I have been pounding on lately, namely that questions about Trump’s pro-business stimulus plans continue to make headlines as to whether they really can be implemented in a timely manner. But, hope still prevails…

As we’ve seen many times before, the downside slip was contained, and the indexes spent the rest of the session grinding back towards the unchanged line but did not manage to cross it to the upside. Weakness in the markets was broad with the exception of Emerging Markets, which managed to gain +0.88%, while gold also closed up.

The dollar was modestly higher, but interest rates continued their recent downward slide with the 20-year T-bond (TLT) gaining +1.01%.

Adding to the general nervousness was news about a probable terrorist attack in Russia, which killed 10 people.

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One Man’s Opinion: The US Government Now Has Less Cash Than Google

Ulli Market Review Contact

Authored by Simon Black via SovereignMan.com,

In the year 1517, one of the most important innovations in financial history was invented in Amsterdam: the government bond.

It was a pretty revolutionary concept.

Governments had been borrowing money for thousands of years… quite often at the point of a sword.

But the Dutch figured out how to turn government loans into an “investment”.

It caught on slowly. But eventually government bonds became an extremely popular asset class.

Secondary markets developed where people who owned bonds could sell them to other investors.

Even simple coffee shops turned into financial exchanges where investors and traders would buy and sell bonds.

In time, the government realized that its creditworthiness was paramount, and the Dutch developed a reputation as being a rock-solid bet.

This practice caught on across the world. International markets developed.

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ETFs On The Cutline – Updated Through 03/31/2017

Ulli ETFs on the Cutline Contact

Below please find the latest High Volume ETFs Cutline report, which shows how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs are positioned.

This report covers the HV ETF Master List from Thursday’s StatSheet and includes 366 High Volume ETFs ETFs, defined as those with an average daily volume of more than $5 million, of which currently 231 (last week 221) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line (%M/A) from those that have dropped below it.

Take a look:

The HV ETF Master Cutline Report            

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms.

If you missed the original post about the Cutline approach, you can read it here.

ETF Tracker Newsletter For March 31, 2017

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/?p=18736&preview=true

A Great Quarter Ends With A Whimper

[Chart courtesy of MarketWatch.com]
  1. Moving the Markets

While it was a great quarter for the indexes, it ended with a whimper as equities could not sustain the upward momentum into the close. Most of the gains were made in January and February while March was a non-event month for the S&P 500, which went predominantly sideways and ended up losing 1 point, while gaining a solid 5.5% for the quarter.

On the downside, energy was the big loser for Q1, financials rallied for the first 2 months peaking on March 1, after which it was downhill with a late bounce off the unchanged line. Tech was the big winner and was well represented by the performance of SMH, which is featured in our “ETFs in the Spotlight” column (section 2).

The one-way trade award for the quarter goes to the US dollar which, despite a February rebound, ended up to the downside in the process supporting gold, which continued its upward march off the December lows. SmallCaps lost some of their luster this month but managed to get back within striking distance of the unchanged line.

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