Markets Keep Rebound Alive Despite Major Sell-Off In China

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

U.S. stocks shrugged off a selloff in Shanghai and were higher as Wall Street seeks to build on yesterday’s V-shape come-back that wiped out big losses and allowed stocks to finish the day up.

There was a huge sell-off of Chinese stocks overnight plunging 6%. It was the worst day of losses in a month. Investors cited fears about the economy, profit taking and liquidity. The early sell-off ins the U.S. and subsequent recovery was almost a mirror image of yesterday prompting speculation of intervention and/or continuation of last week’s short squeeze. You can read more about it here.

Restoration Hardware (RH) took a massive blow today with shares falling 25% on financial results that fell well short of expectations. The CEO cited volatile oil prices and slowed global growth as the culprits.

Wall Street was also digesting mixed economic data. The latest reading on first-time jobless claims rose 10,000 to 272,000. But January durable goods orders for long-lasting big-ticket items like refrigerators and dishwashers rose a better-than-expected 4.9%. So, not only are bad news good news, but also good news are good news. Makes you wonder how much in control the mindless computer trading algos really are.

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Stocks Fight Back To Close In The Green

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks pulled out of an early deep slide to close higher as the common “follow the leader” trend that has dominated Wall Street for most of 2016 came back in play: The direction of oil prices determines the direction of stocks.

The “disappointing” sentiment that oil production caps would not come into play seemed to turn around today, when news of a smaller-than-expected build in crude inventories last week caused the price of oil to go from a loss of nearly 4% to a gain of 1.3%. Stocks followed in suit despite some horrific economic data showing that home sales were the worst in some 2 years and the Services industry was the worst in 3 years. Go figure…

Also impacting market sentiment on Wall Street early Wednesday were comments after Tuesday’s market close from Federal Reserve vice chairman Stanley Fischer. In a speech, Fischer did not rule out an interest rate hike from the Federal Reserve at its meeting next month. “We simply do not know” if (the Fed) will increase borrowing costs in March, he said.

Given that bad news is good news again, anything can happen as we’ve seen today with the Dow rallying over 300 points off the bottom. One of these days, reality about not just domestic but also deteriorating global economic conditions will set in causing rebound attempts to fail miserably leaving the bears in charge. In my view, this is not the time to be a hero and engage in bottom fishing.

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Back To “Correctional” Territory For Dow

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

After its recent hot streak, the Dow Jones industrial average dipped back into correction territory Tuesday as stocks tumbled amid a renewed slump in oil prices and a still uncertain outlook for global growth and U.S. corporate earnings. All major indexes dropped at least 1.1% on the day.

Hopes for a near-term oil production cut were dashed today when Saudi Arabia’s oil minister said a cut is not going to happen because many oil-producing nations likely would not do so, even if they agreed to cutting production. Bloomberg also reported that Iran’s oil minister shot down calls for a production “freeze,” calling such a plan “ridiculous.”

The news pushed oil prices down about 4.75% today to 31.90 a barrel for U.S. Crude.

Domestically, the bad news continued with new orders being crushed as the Richmond Fed Manufacturing survey dropped sharply to a level not seen since 2013. The Consumer Confidence number headed south as well from 97.8 to 92.2, which was its weakest since the middle of 2015.

In banking, we heard today that Citibank (C) was ordered to pay a $3 million penalty and provide nearly $11 million in consumer relief or refunds in a settlement over illegal debt sales and debt collection practices. The stock dropped 3.3% on the day.

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Short Squeeze Continues As Bad News Is Good News

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

After posting its best weekly gain in what has been a dismal start to 2016, stocks kicked off the new week in rally mode as investors reacted to rising oil prices and signs of alleged stability in China’s stock market. Well, there really was no stability but the naming of a new regulator to police the markets is supposed to be a sign that things are under control.

However, economic data points were horrible not just out of Europe but also domestically with the PMI (Purchasing Managers Index) showing the weakest numbers since 2012, so we’are back to the theme that bad news is good news.

Boosting market sentiment to start the week was a big jump in the price of U.S.-produced crude back above the key $30 per barrel mark, which pulled equities higher, however, crude oil news headlines were negative with falling demand and increasing supply framing the big picture. Shorts were squeezed again supplying the upward momentum for this move.

Last week, stocks rallied sharply as investors swooped in to pick up some bargains after the steep selloff to start the year. Wall Street also got a boost from news that Saudi Arabia, Russia and other major oil producers were considering a production freeze, a move, if it comes to fruition, is seen as the first step to stabilize oil prices.

With the S&P 500 now bouncing against overhead resistance in the 1,950 area, I would not be surprised to see the indexes shift in reverse or at least pause until new momentum is found to justify not only the current levels but also a break through this glass ceiling. Still, at this point this entire rebound is nothing but a strong bear market rally, and we need to see far more momentum to push our Domestic TTI (section 3) back into bullish territory.

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ETFs/Mutual Funds On The Cutline – Updated Through 02/19/2016

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 48 (last week 41) 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. 12 ETFs (last week 10) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 29 (last week 27) above the line and 751 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: Does The Market Indicate There’s A US Growth Problem?

Ulli Market Review Contact

ManThe overall pessimism about the US economy has not subsided as nominal GDP growth has been less than three percent, Q4-over-Q4 , and in that kind of world, corporate profits don’t grow very much, said Joe Lavorgna, chief US economist at Deutsche Bank.

People are focused on the labor market, which is a backward looking indicator; companies hired people, but unfortunately as they did that, the bottom dropped out so to speak, especially in manufacturing. It’s likely things will continue to slow, he noted.

The latest retail sales and unemployment reading came in stronger than anticipated. Asked to comment, Joe said retail sales numbers for the past three months are up three percent annualized, which is not a good number, especially given how low energy costs are and how much job growth the economy had.

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