ETF/Mutual Fund Data updated through Thursday, June 30, 2016
If you are not familiar with some of the terminology used, please see the Glossary of Terms.
1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY — since 4/4/2016
Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in above chart) remains above its long term trend line (red) by +1.85% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.
1. Moving the Markets
Equities maintained their newly found upward momentum and rallied for the third day in a row by putting the Brexit sell-off in the rear view mirror and making up almost all losses. In the end, the S&P 500 closed out June just about unchanged.
The assists of the day came from the BOE and ECB via hints that more QE may be forthcoming this summer. That’s all it took and the major indexes recorded their best three-day climb since February 17. Of course, quarterly window dressing added to the overall positive tone.
As I have repeatedly posted, the Central Banks own the stock market, and they control its direction via soothing or accommodating statements designed to elevate the indexes to their desired level no matter how horrific the underlying economic data points are.
My view is that sooner or later some reality will set in, no matter what the jawboning, and equities will correct. It may take just one major trigger like, for example, the Italian banking system imploding or, the mother of all derivatives, Deutsche Bank, which stock price is sliding towards single digits, making its best Lehman Brothers imitation, and we will have a crisis on our hands along the lines of 2008. To me, it’s not a matter of “if” but simply “when.” Be prepared by having an exit strategy in place.
1. Moving the Markets
It is becoming more apparent that Brexit was perhaps just another short-term shock on the market last Friday, at least for the time being. All three major indexes have since posted solid gains, including today. The Dow has risen 554 points since Monday, which is its best back-to-back point climb since August 2015.
The level of fear and investor risk aversion is abating abroad as well, indicated by another day of strong gains for stocks in London and Europe, as well as a second day of solid gains for the British pound. Thus, most analysts are sensing that losses brought on by the Brexit will be largely manageable. Domestically, we are seeing again that poor economic data such as the worst home sales report in 6 years is being ignored, as the HFT algos have shifted into bullish mode no matter what.
The Priceline Group (PCLN) was back in the news today. CEO and founder Jay Walker announced he is launching a new travel site for business travelers. The site is called ‘Upside’ and it will issue gift cards worth upwards of $200 to travelers for their favorite stores in exchange for flexibility on airlines and hotel stays. Jay Walker has created three companies with 50 million customers each in the last several years, thus investors are bullish that he will succeed once again. The stock gained 2.92% to close at $1,239.41 a share.
1. Moving the Markets
Markets on Tuesday flashed their first signs of stabilization as the Dow shot up more than 200 points following a sullied performance last week after the U.K. exit. I am sure equity indexes were oversold during the past couple of days, but it remains to be seen whether this is just hopeful bargain hunting combined with quarter-end window dressing or the resumption of the previous bull market. Global economic weakness and over-indebtedness are still lurking in the background and could put an end to this apparent volume-less dead cat bounce in a hurry.
Stocks that moved higher today include digital marketing company ReachLocal (RLOC) on its merger with Gannett (GCI), Cigna (CI) and SolarCity (SCTY) as Elon Musk’s solar systems maker formed a special committee to evaluate Tesla’s (TSLA) takeover bid. The panel’s creation is seeking to avoid any potential conflicts of interest between the two companies.
In pharma news, we heard today that U.S. pharmaceutical giant Pfizer (PFE) plans to invest roughly $350 million to develop a biotechnology center in China, which could increase the company’s footprint in the world’s second-largest pharmaceutical market. The new facility, which will be their first in China, will be built in Hangzhou and will provide both biologic treatments (medications made in microorganisms, plants or animal cells) for patients in China and worldwide.
1. Moving the Markets
Following the Brexit vote late last week, markets did not boomerang back into positive territory today as some had hoped. In fact, all 3 major indexes here in the U.S. dropped at least 1.5%. What I can tell from today’s trading session, is that the path forward for stocks will continue to be rocky for some time while the political uncertainty in the U.K. and E.U. drags on.
Things looked pretty dicey this morning when the S&P 500 not only knifed through its widely followed 200-day moving average but also broke below its psychologically important 2,000 milestone marker, which it managed to recover by a small margin as we rebounded into the close. Before things got worse and to reduce exposure, I took the opportunity to sell some of our equity ETF positions. We’re still holding on to consumer staples, utilities and gold miners.
The Brexit largely affected bank stocks today, with shares of Barclays (BCS) closing down nearly 21% at $7.03, which marked a second consecutive trading day of double-digit losses for the stock. Britain’s exit also hit Royal Bank of Scotland (RBS), sending the bank’s shares down 13.6% to $4.69 close. The new drop followed a 27.5% plummet in the stock on Friday. Even U.S. bank stocks were not immune and got clobbered.
Our Trend Tracking Indexes (TTIs) have now slipped below their respective long term trend lines. For more details, please see section 3 below.
Submitted by Peter Schiff via Euro Pacific Capital,
Stop me if you’ve heard this one before: A Fed official walks into a bar and says the economy is improving and rate hikes are appropriate. The patrons order another round to celebrate. Then disappointing data comes out, the high fives stop, and the Fed official ducks out the back…only to come back the next day saying the same thing. Anyone who pays even the smallest attention to the financial media has experienced versions of this joke dozens of times. Yet every time the gag gets underway, we raise our glasses and expect the punch line to be different. But it never is. Last week was just the latest re-telling.
For nearly a month the Fed’s bullish statements stoked optimism on the economy and raised expectations, based particularly on the most recent FOMC minutes, for a summer rate hike. But these hopes were dashed by the May non-farm payroll report, which reported the creation of only 38,000 jobs in May, the worst monthly performance in six years, based on data from the Bureau of Labor Statistics (BLS). The number missed Wall Street’s estimate by a staggering 120,000 jobs. If not for the 37,000 downward revision reported for April (160,000 jobs down to 123,000), May could have shown a contraction. This would have constituted a major black eye to the Obama Administration’s favorite talking point that its policies have led to 75 months of continuous job gains. (6/3/16, Democratic Policy & Communications Center).