Crude Oil Drives Indexes

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Another rally in crude oil prices boosted energy, while residual goodwill after a dovish Federal Reserve meeting powered broader markets higher. Early in the day, the Dow Jones industrial average crossed into positive territory for the first time this year and stayed there, capping a remarkable comeback from Wall Street’s worst ever start to a year. The buying wave continued and, this afternoon, the S&P 500 index also crossed into positive territory for the first time this year.

Adding to the enthusiasm was the news that the Fed lowered its plan to two more quarter-point hikes this year, down from the four it had predicted previously. The new plan was more aligned with Wall Street analysts’ expectations. On the other hand, it’s a sad day to realize that the Fed considers economic conditions so deplorable that they’re fearful to even implement a meager 0.25% interest rate hike in an effort to finally get on track in normalizing rates.

Shares of Williams Sonoma (WSM) slid today after the company released disappointing sales and earnings figures for the holiday season. The wholesale retailer suffered a drop in both same-store and e-commerce sales at their key client Pottery Barn. Shares dropped 6.26%.

In corporate and economic news: Applications for unemployment benefits rose slightly last week, the Labor Department reported, but they remain at levels consistent with a healthy job market. Weekly jobless claims rose by 7,000 to a seasonally adjusted 265,000.

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Fed Moves Markets—Domestic TTI Touches Its Trend Line

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

U.S. stocks rallied modestly after the Federal Reserve left interest rates unchanged and signaled more gradual increases.Wall Street had expected the Fed to keep rates unchanged, but wanted clues as to the timing of the Fed’s next rate increase. The Fed lowered its plan to possibly two more hikes this year, down from four, for a total increase of 50 basis points, which is much more aligned with Wall Street analysts’ expectations.

Stocks have been in rally mode since mid-February, driven in part by corporate buy-backs, rebounding oil prices and a belief that the Fed may not be as aggressive with rate hikes as originally believed following early-year financial market turbulence and slowing growth abroad.

The recent oil price rally raised hopes among producers that the worst may be over when it comes to the slump that has persisted for 14 months now. Personally, I don’t think we’ve seen the lows for the year yet.

As a result, after months of torturous declines, energy stocks have been making a comeback as oil prices rallied from an oversold condition not unlike the stock market. The 40 energy stocks in the Standard & Poor’s 500, including Exxon Mobil (XOM), exploration company Range Resources (RRC) and pipeline company Kinder Morgan(KMI), have put $209 billion back into the pockets of investors since oil prices hit rock bottom on Jan. 20. Let’s see how long this rebound can last in the face of overproduction, slowing global demand and storage facilities that are close to reaching their limit.

With today’s rebound, our Domestic Trend Tracking Index (TTI) touched its long-term trend line. Please see section 3 below for details.

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Waiting For The Fed

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks ended at par today as Wall Street reacted to a resumed slide in oil prices and braced for the Federal Reserve’s decision Wednesday on interest rates.

A major driver of the recent stock market rally has been a sharp rebound in oil prices. But U.S.-produced crude has reversed course the past two trading sessions and has resumed its fall amid fresh worries about oversupply, which has weighed on market sentiment. A barrel of West Texas Intermediate crude closed down 2.3%, to $36.45.

Investors were also digesting the decision of the Bank of Japan not to slash interest rates further, after surprising markets back in January when it cut rates into negative territory for the first time. The BOJ left rates unchanged and didn’t boost its stimulus measures currently in place.

In pharmaceutical news today, we heard that shares of Valeant Pharmaceuticals International (VRX) suffered their worst one-day plunge ever, losing more than half their value after the embattled drug maker issued lower earnings and financial forecasts and outlined potential bond defaults that could affect the firm’s borrowing. Ouch!

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Going Sideways

Ulli Market Commentary Contact

Mon chart

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The Dow, which is looking to extend its weekly winning streak to five, traded slightly higher as investors looked ahead to a key Fed meeting on interest rates later this week.

We have a big week ahead of us. The Federal Reserve meets Tuesday and Wednesday and Wall Street will be closely monitoring its policy statement on Wednesday to see if they raise interest rates or if they plan to in the near future.

It was a strange day in that crude oil got clobbered and lost over 3.5% while equities decoupled and held firm. The S&P 500 is now bouncing around its 200-day moving average and it remains to be seen whether this level can be conquered or act as glass ceiling. If the S&P 500 breaks through to the upside, major resistance will come in around the 2,045 mark, a level which might coincide with a new potential Domestic Buy signal.

So far, this rally is still considered a bear market rebound, and it’s questionable whether it will have enough legs to push back into bull market territory. But, as we’ve seen in the recent past, all it takes is some headline hockey to cause the computer driven algos to push the indexes higher regardless of underlying fundamental realities.

One well-known hedge fund manager put it this way: The upside is maybe 2% while the downside is 20%. We’ll have to wait and see if he’s right.

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ETFs/Mutual Funds On The Cutline – Updated Through 03/11/2016

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 154 (last week 99) 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. 41 ETFs (last week 22) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 104 (last week 59) above the line and 676 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: Has The European Central Bank Failed To Boost Economic Growth In The EU?

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ManCentral banks around the world, especially the European Central Bank (ECB), have done a pretty good job of preventing the downside, but they really have not kicked up the upside with respect to economic growth, said John Silvia, chief economist at Wells Fargo Securities.

Both growth and inflation expectations have been lower over time. There have been contradictions in the ECB’s stance; ECB chief Mario Draghi says at one point in time the ECB would do whatever it takes (to protect the euro), and at his latest press conference he said the central bank is done doing anything with respect to interest rates. Evidently, there’s a contradiction there and there’s a communications problem about what Draghi is really telling people, he noted.

Following Draghi’s statement, the euro strengthened – an outcome that the ECB surely had not hoped for.  Similarly, the yen unexpectedly strengthened following the Bank of Japan’s policy announcement. Asked if the market’s losing confidence in the policy path of central banks, John said the markets are sensing that whatever the policy move is at the present time, it’s far less effective than what people might think otherwise, or what the central bankers themselves think.

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