The Short Squeeze Continues

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Markets are on a 3-day run heading into the end of May and it seems that a ‘Rally Cry’ is on the tip of everyone’s tongue despite China devaluing their currency to the lowest in 5 years and the U.S. services industry tanking. So, what is driving markets higher this week? A continued rise in oil prices and a flexing of strength in the housing market. Both of these signal that the economy and the market overall can allegedly withstand a (tentative) rate hike.

U.S. crude oil gained substantially today closing up 2.18% at $49.68 a barrel. Many analysts are saying that if the commodity pushes above $50 a barrel, that the bulls can once again blow some steam out their nose and start kicking the dirt. So, let’s keep an eye on oil prices heading into the summer.

As investors are watching the Fed and their deliberations over hiking rates, one other commodity has been hit hard. That commodity is gold. The precious fine metal is at a seven-week low, now priced at $1,222.85 per ounce and U.S. gold futures have fallen accordingly. Adding to the downtrend of Gold has been the continued rise in the USD, which still stands near a two-month high against a basket of major currencies.

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Markets Storm Back With Force But No Volume

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

After an uneventful start to the week, markets here in the U.S. sprang back into action and posted their largest gains since early May. All three major indexes gained at least 1.20% on the day but with volume being downright atrocious, this move is suspect.

The year has been volatile thus far to say the least. A big reason for this volatility has been the Federal Reserve’s on-again, off-again plan to normalize interest rates. However, markets always tend to react well to solid economic data, and it was good news on the housing front that pushed markets higher today.

The Commerce Department reported that sales of new single-family homes jumped almost 17% to an annualized pace of 619,000 in April. That is the highest level since January 2008 and well above the 523,000 new home sales that economists were expecting in April. Of course, extreme numbers like this are likely to be revised sharply, which we will find out next month.

Also providing a lift for stocks Tuesday was a reversal to the upside for U.S. crude, which traded lower in the day, but mounted a strong comeback by the closing bell. A barrel of U.S. crude gained 1.48% on the day to close at $48.78.

And in M&A news, I mentioned yesterday that Monsanto (MON) was being courted for an acquisition by Bayer AG (BAYRY). Well, news stories today were quite clear in stating that Monsanto has officially turned down the $62 billion offer as being “financially inadequate”. A spokesperson from the company did say that they would entertain future offers from Bayer AG though.

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Mellow Monday; GE And Bayer Making Bids; Fedspeak On Deck

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Markets were little changed at the closing bell as Wall Street continues to contemplate the (potential) interest rate hike in June and a lingering sluggish growth rate of the U.S. economy.

While Monday was quiet overall, investors are awaiting data on April new home sales Tuesday, as well as earnings results from auto parts retailer AutoZone (AZO) and TV and electronics retailer Best Buy (BBY).

In M&A news, we heard rumors today that GE is in the midst of making a number of deals with the United Arab Emirates as part of a plan to wean the country from its dependence on oil production. The tentative plan also calls for floating a stake in the world’s largest oil company, Saudi Arabian Oil Co., and setting up one of the world’s biggest government investment funds. Shares of GE closed slightly lower than par today.

We also heard today that German pharma giant Bayer AG (BAYRY) has offered an all cash bid of $62 billion for U.S. seed company Monsanto. Bayer would pay Monsanto shareholders $122 per share, which was a 37% premium over the closing price of $89.03 on May 9. Shares of Monsanto today gained 4.41% to close at $106.00 a share.

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ETFs/Mutual Funds On The Cutline – Updated Through 05/20/2016

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 265 (last week 242) 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. 62 ETFs (last week 55) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 322 (last week 261) above the line and 458 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.

One Man’s Opinion: Markets Have No Purpose Any More…

Ulli Market Review Contact

Man

By Mark Spitznagel

After making over $1 billion in one day last August, and warning that “the markets are overvalued to the tune of 50%,“ Mark Spitznagel knows a thing or two about managing tail risk.

The outspoken practitioner of Austrian economic philosophy tellsThe FT, “Markets don’t have a purpose any more – they just reflect whatever central planners want them to,” confirming his fund-management partner, Nassim Taleb’s perspective that “being protected from fragility in the financial system is a necessity rather than an option.”

“This is the greatest monetary experiment in history. Why wouldn’t it lead to the biggest collapse? My strategy doesn’t require that I’m right about the likelihood of that scenario. Logic dictates to me that it’s inevitable.”

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New ETFs On The Block: Guggenheim Large Cap Optimized Diversification ETF (OPD)

Ulli Equity ETFs Contact

91551519Guggenheim Investments, the eighth largest US issuer of exchange-traded funds with $27.5 billion in ETF assets-under-management, and the first to launch the so-called strategic/smart beta products, recently rolled out an ‘optimized’ strategic-beta product targeting the large capitalization US stocks.

The newly minted Guggenheim Large Cap Optimized Diversification ETF (OPD) seeks to replicate the performance of the Wilshire Large Cap Optimized Diversification Index, and pulls from the much broader Wilshire US Large Cap Index to target names that tend to show higher individual stock risk, and therefore lower correlation with the market or the parent index.

The portfolio constituents are weighted by correlation and dispersion in order to optimize the benefits of diversification, though the actual details are thin. The underlying index is constituted through a proprietary Wilshire algorithm and individual stocks are included to the extent they contribute to the fund’s overall diversification.

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