Sloppy Wednesday; Bayer To Acquire Monsanto

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

After early gains, U.S. stocks ended mixed following a steep drop Tuesday and a three-session bout of heightened volatility sparked by fears of rising interest rates.

Investors have been jittery of late. Worries include fears that higher interest rates will hurt the economy, overvalued stock prices and continued uncertainty over the presidential election, not to mention the strength of the economy. The biggest weight on the economy has been justifiable concern that the U.S. equities and other financial assets have been artificially inflated due to the easy-money policies of central bankers. That has raised fears of a long overdue correction to get prices better aligned with business fundamentals, such as corporate earnings and the slower growth rate of the U.S. economy.

There was big news in the Agriculture world today. Germany-based health and agricultural giant Bayer reached a deal to acquire St. Louis-based seed and pesticide firm Monsanto (MON) for $66 billion in yet another jolt to a global agricultural sector that has been rocked by sluggish crop prices. The good news for Monsanto is that Bayer agreed to pay a $2 billion breakup fee if the deal collapses under anti-trust pressure.

Oil prices, which fell 3% on Tuesday, and were a factor in the steep slide in stocks, have remained volatile today. However, by day’s end, a barrel of U.S.-produced crude was up 11 cents, or 0.2%, to $45.01 per barrel.

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The Morning After A Dead Cat Bounce

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Today’s pullback certainly made yesterday’s rebound look like a dead cat bounce. Of course, you can never be sure but stocks shifted into reverse today falling sharply led by lower oil prices and weak financials.

Despite Fed officials taking a more dovish stance, there appears to be a heightened level of insecurity regarding potential rate hikes; or, markets have gotten simply tired of the endless jawboning and have lost confidence in the Fed’s commentary du jour.

Again, volatility has returned, and the major indexes have moved more than 1% in either direction in the past 3 days, which is something that we’ve not seen all summer. There is probably more to come, and it is important that you know when to execute your sell stops just in case this pullback turns into a full blown bear market.

If you tend to ignore bear markets, please take a look at the chart below:

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Rebounding Off The Friday Lows

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

On Friday, I mentioned that the Fed might attempt to talk this market back up after the sharp and sudden pullback. As if on cue, three Fed govs, namely Brainard, Lockhart and Kashkari, used various venues to opine the predominantly dovish message that a rate hike might not be compelling.

That’s all it took, and the algos ran amok pulling the major indexes out of the doldrums and, more importantly, pulled interest rates back down after Friday’s spooky spike. Of course, no one can be sure that all is well again, and that we’ll continue to go higher from here. Personally, I expect more fireworks as we head deeper into the notoriously volatile season of the year.

In oil news today, we saw U.S. Crude imports rise .31% to $46.02 a barrel. U.S. average never really rose above $50 a barrel over the summer months, which usually experience high seasonality increases due to travel. That is leading analysts to believe that prices will remain within the $40-$50 a barrel bracket through the fall season.

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One Man’s Opinion: Investors Are Sticking With Pavlov’s Dog Until Everything Breaks

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OneMan'sOpinionBy Zero Hedge

Remember when “bad news is good news” first leapt into common parlance? At first it was used as a way to describe the reaction function of Fed policy-makers. It was taken as a cute turn of phrase in encapsulating the state of the world. Over time, as Bloomberg’s Richard Breslow explains, it’s morphed into an ugly and cynical way of justifying mindless investing behavior.

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Central banks that cultivated and encouraged irrational exuberance as their main transmission mechanism of monetary policy are now hopelessly caught in its infinite loop. Seemingly feeling the need to continue doing more of the same, no matter the efficacy.

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ETFs On The Cutline – Updated Through 09/10/2016

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Below please find the latest High Volume ETF 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 318 (last week 322) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line 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 September 9, 2016

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ETF Tracker StatSheet

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https://theetfbully.com/2016/09/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-09082016/

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Market Commentary

TURBULENCE CREEPING INTO MARKETS

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Wall Street got a big wake-up call Friday as fears on an interest rate hike were exacerbated by news from the Fed, which indicated that an interest rate hike is just around the corner. All three major indexes closed down by at least 2.12%. Not helping sentiment was last night’s news that Japan might be steepening its yield curve, the effects of which could have far reaching market implications.

The so-called “hawkish” commentary by Eric Rosengren (President of the Federal Reserve Bank of Boston) follows the ECB’s decision this week to keep rates at current levels, which was a disappointment to investors who thought additional stimulus was needed to get the Eurozone economy moving again.

Prior to today’s decline, it had been a quiet and complacent period for stocks, with volatility very low, a development that was starting to make some investors nervous. Heading into today’s session, the S&P 500 had gone more than 50 trading days without a drop of 1% or more, only the 48th time that has happened since 1950, according to Sam Stovall, U.S. equity strategist at S&P Global Market Intelligence. I have repeatedly commented that this will come to an end at some point, and I am very curious to see if this is the beginning of a new prolonged downturn or if Central Banks will shift their jawboning in reverse and “talk” the markets back up next week. Stay tuned!

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