ETF/Mutual Fund Data updated through Thursday, June 9, 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 +2.47% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.
1. Moving the Markets
European and Asian markets were down and so were the US major indexes, at least in the early part of the session. Then the usual afternoon Lift-A-Thon pulled the major indexes up but we still closed slightly below the unchanged line.
Well, Wall Street was hoping that the S&P 500 would push to a new record high today, but that did not happen. The index, haunted by speculation over weak global growth and a steep drop in government bond yields, ended down 0.2% after a three-day run towards an all-time high.
Also weighing on stocks of late is a rise in the value of the USD, which is putting pressure on commodities, such as oil. U.S. crude fell 1.54% today to close at $50.44 per barrel. U.S. oil topped $51 a barrel yesterday, which marked an eleven-month high and investors remain bullish that the commodity will push even higher heading into summer.
In regards to the current nosebleed level of the markets, here’s the latest S&P 500 price chart compared to its earnings per share (EPS) expectations, courtesy of ZH:
1. Moving the Markets
The S&P 500 continued to push towards its all-time high of 2,130.82 today, as the index closed at 2,119.12. Surprising as it may seem, energy has been the main driver for the S&P 500 this year. The Standard & Poor’s 500 index energy sector is up 14.8% to date, which makes it the best of the 10 sectors in the market by far.
Partly driving energy performance higher lately has been oil. The black gold commodity hasn’t settled above $51 since July of 2015, but passed that mark today to close at $51.17 a barrel. This is a notable gain, especially considering that prices were around $30 a barrel for the better part of Q1.
The weaker outlook for global growth continues to be a drag on the market though confirming that the lofty levels of the indexes are simply a function of manipulation. The health of the global economy has just been unable to break out of its low growth trajectory and dangerously low inflation despite massive stimulus and intervention from government authorities worldwide, particularly the ECB and Bank of Japan. It goes to show that the stimulus programs have done nothing but elevate market levels and have had no positive effect on underlying US macro data.
As I posted before, as long as bad economic news abound, translating into continued dovish Fed behavior, the S&P 500 is scheduled to make new all-time highs by next Tuesday at the latest. The question is: Then what?
1. Moving the Markets
An early rally failed but left the major indexes near multi-months highs despite a late session pullback. It looks like the computer algos continue their push towards all-time highs on no news other than that oil not only climbed above the $50/bbl level but also closed there. The fly in the ointment was that volume was the lowest for the year 2016, which makes this rally suspect.
Investors continued to digest Fed chief Yellen’s remarks as to whether they might be at the verge of delaying the timing of future rate hikes because of last week’s horrific unemployment report. Eventually, Wall Street participants will have to realize that any delay of an interest rate hike is predominantly a function of a weak economy and a potential recession.
It means, as I have repeatedly posted, that the S&P 500, as the major benchmark index, is totally disconnected from underlying US Macro data. ZH featured an updated chart that posts the question “Who will be proven correct?” Take a look:
1. Moving the Markets
Front-running Fed chief Yellen’s speech was the idea of the day on hopes that Friday’s bad jobs report would be great news for the markets. Forget the Dow today, it was all about the S&P 500 as it set a 2016 closing high in today’s trading, after Fed chair Janet Yellen hinted at a relatively upbeat view of the U.S. economy, despite the horrific May jobs report.
However, in a speech that Wall Street was closely watching, Yellen noted that the Fed may still feel it is appropriate to gradually increase borrowing costs if the labor market regains momentum and inflation perks up. There was no indication as to when the next hike may be though. In other words, no Fed commitment should mean further upward momentum for the markets, no matter how poor the fundamentals, which also means we are about to make new all-time highs in the near future as soon as we get some more negative economic data points, After all, it’s all about maintaining market levels and the chosen tool for this accomplishment is continued dovish/hawkish jawboning by the various Fed mouthpieces.
In commodities news, it seems that oil, gold and silver might be heading towards a bull market in the summer months, which would end a 5-year drought. The speculation is mostly due to the fact that gold is on course to snap three straight annual declines and silver is also higher as concern over the health of the global economy and the dollar’s retreat has boosted demand for precious metals as stores of value.
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Central bankers not only continue to insist their free money for financiers will eventually “trickle down” to the masses–they’re angry that the masses aren’t buying it. Central bankers are now blaming the masses for maintaining a perverse psychological state of disbelief in the omnipotence of central banks and their policies.
Central bankers are raging at the psychology of hesitant households, which they finger as the cause of global weakness: if only people believed everything was great, they’d borrow and blow tons of money, and the ship would leave port with a full head of steam.
The central bankers have spent seven years constructing “signals” that are supposed to create a psychological state of euphoria that leads to more borrowing and spending. The stock market is at all-time highs–don’t those stupid masses get it? That’s the “signal” that all’s well and they should get out there and borrow more money to enrich the banks!