Winning Streak Takes a Breather

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The U.S. stock market, which is now enjoying its second-longest bull run ever, closed lower today despite decent reports on the U.S. economy. While some Wall Street pros say the recent surge has put stocks temporarily in an overbought state, the general consensus is that the bull is alive and well and will post further gains as the breakout continues unless reality with underlying fundamentals sets in.

The Fed stated today that the U.S. economy picked up modestly in late May and June as the recovering housing market underpinned growth while the beleaguered manufacturing sector improved somewhat. Surprisingly, the summary said that employment continued to grow modestly despite the 287,000 June job gains reported by the Labor Department last week.

Manufacturing has been the biggest blemish on the economy for well over a year as weakness overseas and a strong dollar curtailed exports, and low oil prices have dampened investment in the energy sector. Commercial real estate sales and leasing also was stable or improved the Fed said.

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Dow And S&P 500 Soaring Past New Highs

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

One record setting day this week wasn’t enough for Wall Street it seems. Yesterday, the S&P 500 passed its high water mark and obviously impressed investors, but the Dow got jealous and joined the S&P 500 in taking out its 2015 all-time high and moving into previously untouched territory.

Some are asking themselves, how is this bull market different from the 2015 bull market? Well, the market might look like a bull party, but beneath the surface, investors are playing it much safer than they did in 2015. Stable and high-yielding stocks like utilities, real-estate investment trusts and energy are the best performing asset classes this year. That’s completely different from May 2015, when the leading stocks were risky investments like biotech, consumer discretionary and technology stocks. Still, keep in mind this does not change the fact that this rally is built on nothing but hope for more stimulus by the central banks and is not based on improving fundamentals.

As I mentioned last week, Alcoa (AA) was set to kick of Q2 earnings season this week. They reported after the bell Monday and shares gained more than 5% today after the aluminum giant reported better-than-expected results. Overall, the news from corporates here in the U.S. is not expected to be good, with analysts estimating S&P 500 company profits will be down 5.2% overall from a year earlier. Again, none of this matters as long as the Fed is your friend and remains accommodative. Until—one day—the bottom drops out.

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A Goldilocks Environment?

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Friday’s rally following the 287k jobs number, which was only impressive on the surface, continued into Monday as traders considered the current situation a Goldilocks scenario. Because there is continued uncertainty about the fallout from the Brexit vote, the higher than expected jobs number is not seen as a signal that the Fed might be raising rates in the near future, hence we have unbridled optimism.

Helping equities was the fact that Japan’s PM Abe won his election with his ruling coalition over the weekend and his now having two-thirds majority in their upper house giving him the power to push through possibly the mother of all stimulus programs. Not by coincidence, I am sure, former Fed chair Bernanke has been meeting with Abe and rumor has it that even the theme of “Helicopter money” will be discussed.

That’s all it took, and the the Nikkei shifted into overdrive by gaining almost 4% on the day with momentum flowing into the U.S. markets at the opening. European equities gained as as well despite the fact that their banking system is in danger of collapsing with Italian banks being the center of attention followed by Deutsche Bank.

But then again, who cares about these little inconveniences when major stimulus programs can drive equity markets higher no matter what. Case in point today was the Nasdaq, which pierced through its 5,000 level but failed to hold it. If you look at the chart below, it simply does not make sense:

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One Man’s Opinion: Brexit Proved It’s All A Central Bank Funded Mirage

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OneMan'sOpinionAuthored by Mark St.Cyr,

I keep hearing that the “Chicken Little’s” are once again being proved wrong. We keep being shown chart, after chart, after chart, after chart how the market recovers from perilous sell-offs. This is expressed as “proof” the “market” doesn’t want to go down, and has legs to vault ever higher.

Cause for concern is being dismissed by the hordes of next in rotation fund managers, economists, Ivory Tower academics, or Nobel Laureates as they themselves stampede to any available cameras, microphones, or keyboards that will quote them as saying “See…all that worrying is for naught. And expressing anything other is strictly for the gloom and doom crowd.” Which they then will triumphantly state: “Which has been wrong over, and over, and over again.”

My response is this: Then why is nobody buying it? (e.g., the market) Figuratively, as well as literally.

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ETFs/Mutual Funds On The Cutline – Updated Through 07/08/2016

Ulli ETFs on the Cutline Contact

Below are the latest ETF Cutline reports, which show how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs/MFs are positioned.

The first report covers the ETF Master List from Thursday’s StatSheet and includes 381 ETFs, of which currently 310 (last week 306) are hovering in bullish territory.

The second report includes only High Volume ETFs. To clarify, High Volume (HV) ETFs are defined as those with an average daily volume of $10 million or higher. Volume figures can change in a hurry, so be sure to check first before investing.

These ETFs are generated from my selected list of 98 that I use in my advisor practice. It cuts out the “noise,” which simply means it eliminates those ETFs that I would never buy because of their volume limitations. 77 ETFs (last week 77) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 623 (last week 518) above the line and 157 below it out of the 780 that I follow.

Take a look:

  1. ETF Master Cutline Report
  2. ETF High Volume Cutline Report
  3. MF 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/No Load Fund Tracker Newsletter For July 8, 2016

Ulli ETF Tracker Contact

ETF/No Load Fund Tracker StatSheet

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https://theetfbully.com/2016/07/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-07072016/

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Market Commentary

MARKETS END SOLID AFTER KEY JOBS REPORT

Fri pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The S&P 500 approached setting a new closing high today after a stronger-than-expected jobs report sparked a huge rally and Wall Street finally recouped all of its ‘Brexit’ related losses.

The jobs report that many were awaiting reported that 287,000 jobs were created in June, far above the 180,000 estimate, which as a headline number looked good, so the computer algos ran with it. However, when looking under the hood, it turns out that not only was last month’s number reversed from a meager 38,000 gain to only 11,000, most of the current additions were in the minimum wage area and also gobbled up by those over 55 years of age. These are hardly facts that will contribute towards reducing U.S. recession fears on Wall Street and for the rest of the globe.

The good news on the jobs front could, however, put a potential interest rate hike by the Federal Reserve back on the table for later this year, perhaps in December. Investors that had been ruling out any rate hikes until next year might have to rethink their views. But hey, as long as the computer algos are programmed to play headline hockey, all is well…

In auto news, we heard a final decision from Volkswagen Group today that it will officially pay $86 million in civil penalties to California after the state’s regulators helped to expose the company’s emissions scandal. That settlement is separate from a recent deal between U.S. regulators and Volkswagen in which the automaker has agreed to pay up to $14.7 billion to buy back vehicles, make repairs, offer compensation to consumers, or some combination of the above.

Closing out the week, the markets seem to be headed in a bullish direction moving forward. The S&P 500 is flirting with record high territory and the question in my mind is “what’s next?” once this goal has been achieved. After all, I facetiously commented 2 days ago that we should reach new all-time highs by next Tuesday.

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