One Man’s Opinion: Is There A Disconnect Between Fed’s GDP Forecast And Equity Indices?

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ManThe VIX (volatility index) should be at 20 and the S&P 500 index should be at 1,970 said Julian Emanuel, US equity and derivatives executive director at UBS. Investors need to remind themselves that the current environment is different from the past 3 ½ years; it’s a high-volatility environment.

The rubber band was stretched to the downside in February and a massive capitulation was witnessed. UBS thinks markets will end up higher toward the end of the year; but when the VIX trades back down to 14, the market has essentially gone up in a straight line at the same time expectations for the economy in the first quarter from 2 percent growth to the Atlanta Fed’s GDP growth forecast now at 0.4 percent indicating there’s a disconnect there, he noted.

Asked how markets can end higher for the year if the S&P 500 drops to 1,970, Julian said the current narrative is one of those stories where the investors are finding their footing, the economy is finding its footing and its very clear the Fed is going to err on the side of dovishness, which means market participants need not worry about rates running away.

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New ETFs On The Block: PowerShares DWA Tactical Multi-Asset Income Portfolio (DWIN)

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91551519The fund-of-funds investment strategy has become quite popular among investors and exchange traded fund managers have been quick to get off the block in order to capitalize on the growing trend.

Invesco PowerShares, a leading global provider of ETFs, recently launched the PowerShares DWA Tactical Multi-Asset Income Portfolio (DWIN) that takes the F-o-F (or rather the ETF of ETFs) investment approach, and invests in other ETFs rather than in individual securities.

DWIN expands the firm’s relationship with Dorsey, Wright & Associates (DWA), a Virginia-based investment advisory firm that are pioneers in technical, momentum and relative strength investing strategies. While PowerShares already has a long lineup of products with the firm, the First Trust Dorsey Wright Focus 5 ETF with $4.2 billion in assets have been DWA’s most successful product with any fund manager yet.

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ETF/No Load Fund Tracker Newsletter For April 8, 2016

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ETF/No Load Fund Tracker StatSheet

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https://theetfbully.com/2016/04/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-04072016/

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Market Commentary

VOLATILITY REMAINS AT THE FOREFRONT TO END FIRST WEEK OF TRADING

Fri pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

It has been a volatile week needless to say; however, markets have not lost too much momentum with the S&P gaining for the day but losing some 1.2% for the week. The S&P 500 and Dow both remain in the black for the year, but the upcoming earnings season will be a big determinant as to how stock performance may sway over the next quarter. It all depends how the much lowered earnings expectations (along with future outlook) are received and if these numbers can be beat due to the bar having been set extremely low.

Today, the boost in oil prices initially boosted sentiment on Wall Street and pushed the Dow up sharply in morning trading, but the gains could not sustain and the markets gained only modestly on the day after falling from grace in the early afternoon.

Energy stocks led the gains as U.S. benchmark crude gained $2.27 to $39.53 a barrel and got within striking distance of the key $40-per-barrel level.

Let’s look forward to the upcoming earnings season with Alcoa (AA) reporting first.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 04/07/2016

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ETF/Mutual Fund Data updated through Thursday, April 7, 2016

TOC040716

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

TTI

Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in above chart) has recently crawled above its long term trend line (red) and finally generated a new “Buy” signal effective 11/3/15. The market subsequently dropped, and we exited again on 11/13/15. As of today, the TTI has just moved above its trend line by +1.08%. As of Monday, April 4, 2016 a new Domestic Buy signal became effective as posted on the blog.

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Markets Drop; Are The Bears Sharpening Their Claws?

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The bullish optimism that was powering stocks over the past month is fizzling. Caution and skepticism are poking holes in the sentiments, and the bears are slowly awakening from hibernation it seems. Whether it will be enough to end our recent Buy signal remains to be seen.

Oil has resumed its decline, dropping 2.6% to $36.77 a barrel, and investors are still on the edge of their seats awaiting corporate earnings, which aren’t expected to be strong. However, the bar has been set so low that some companies ought to be able to beat those expectations and help keep the bullish dream alive.

Of course, the Federal Reserve said last month that it only plans to hike interest rates two times this year – not four. And the minutes of its March meeting suggest a rate hike this month isn’t likely. Still, uncertainty related to the Fed’s plans still persist as strong jobs data in the U.S. collides with risks from abroad, low inflation and a recent slowdown in U.S. economic growth.

Let’s see what the markets can do tomorrow to round out the week!

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Oil Ignites Equities

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Markets rallied today as investors reacted to a rebound in oil prices of over 5%, but hesitancy remains amidst upcoming earnings season and the race for the White House.

The outlook for Q1 earnings remains bleak at present. Analysts expect a nearly 8% contraction in earnings, which would mark a third straight quarter of negative growth. That (by textbook definition) is called a ‘profits recession’. So, investors will want to hear some positive talk from CEOs about the future to get excited again about stocks.

Let’s remember, stocks aren’t cheap these days after the recent rally, Data that came in today said that stocks on average are trading at 17x earnings estimates and that refers to non-GAAP estimates, which are much less accurate and favor the companies. GAAP refers to Generally Accepted Accounting Principles and if those were actually applied, stocks on average would be trading in excess of 20x earnings.

Adding to the market confusion is that fact that the Fed said they may only hike interest rates twice this year, instead of four times. So, uncertainty remains in this sphere. Again, we are talking about a lousy ¼ of a percent hike here (or 1% per year), which apparently the economy is not able to handle without market turmoil. That alone tells you all about the state of the alleged recovery you need to know.

Lastly, political risk is still impacting markets. The race for the White House is still very much up for grabs and many of the candidates are “outside the financial mainstream”, which worries many investors. Thus, the markets are a bit stagnant until some of these worries gain more clarity.

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