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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Sudden Anxiety Spooks Market

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The U.S. stock market posted its second day of losses, not due to any major market moving news, but because of anticipation of…earnings season.

Earnings season kicks off a week from today (April 11th) and investor sentiment is mixed in its expectations.  Many investors are speculating that Q1 growth will be minimal, but others remain bullish that growth will pick up towards the end of Q2 and ride the wave of solid growth into Q3. As always, we will simply follow the long-term trend, which is currently bullish, but we have no issue with exiting should this bullish signal turn out to be a headfake.

Oil remains as low as it was a year ago and we are still experiencing some currency pressure on the USD as it is presently on a 5-day slide. Both have a formidable impact on the market, so keep an eye on those two indicators and how they correlate to earnings season.

Tesla had a bit of a scare today, but the stock moved higher nonetheless.  Tesla (TSLA) had a hiccup in new vehicle deliveries due to a shortage of parts.  Elon Musk said that it has addressed the delivery shortcomings and assures they will not be repeated when the model 3 sedan hits the market next year.  The company says it is on track to deliver 80,000 to 90,000 new vehicles this year.

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Oil Gets Spanked And Indexes Slip—Domestic Buy Signal Confirmed

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Wall Street kicked off the week to a mediocre start after posting solid gains the week prior.  Better than expected readings on jobs, manufacturing and interest rates were market movers last week.  This week, Wall Street will be focusing more on economic data, such as February factory orders and the March reading on the services sector.

I am still pondering whether the rally since mid-February has real staying power or whether it’s a fleeting bounce that will end with the market reverting back to its early-year downward trend and lead to the first bear market, or 20% drop, since the 2008-2009 financial crisis. While no one has an answer, market action this morning confirmed our “Buy” signal from Friday to start moving back into “broadly diversified domestic equity ETFs/Mutual funds,” a process which I started in my advisor practice this morning.

Again, we will carefully participate in this new cycle with limited exposure to make sure the trend holds before making further commitments.

Crude oil got spanked again as prices dropped 3.78% to close at $35.62 a barrel. Some analysts are now predicting that in the face of the oil glut with storage spaces overflowing, reduced demand and the scheduling of useless OPEC meetings may push oil back into the 20s.

No good news for SunEdison (SUNE) today. The company is bleeding cash and continues to stumble towards an anticipated bankruptcy filing in the near future. Its descent hit top speed in early March when their proposed acquisition of solar company Vivint collapsed after it was not able to secure the financing necessary to seal the deal. The stock now stands at $0.21 a share.

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ETFs/Mutual Funds On The Cutline – Updated Through 04/01/2016

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 246 (last week 176) 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. 56 ETFs (last week 44) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 237 (last week 125) above the line and 543 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: Do Investors Need To Be Extra Cautious In The Months Ahead?

Ulli Market Review Contact

ManBond investors need to think in a portfolio context and should not get in and out of bonds in trying to pick the bottoms from the tops, said Jeff Rosenberg, chief investment strategist for fixed income at BlackRock.

The value of US Treasury securities act as a ballast and offsets the risky instruments in a portfolio that investors add for income and capital appreciation. When things go wrong, Treasury securities have demonstrated they can act as ballasts in portfolios, he noted.

While high-grade corporate and government bonds have rallied in recent months, high-yield/junk bonds failed to participate though they have shown signs of improvement. Asked if junk bonds still offer value or if the lack of investor interest is some kind of a signal that risk-aversion is still out there, Jeff said it’s a little bit of both.

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