Oil Feeds The Markets

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks ended higher in choppy trading as oil prices rose for a third straight day and moved above $33 a barrel. The major indexes posted gains early as strong corporate earnings reports provided a boost which quickly evaporated before equities mounted another comeback.

In earnings news, Amazon (AMZN) missed Wall Street expectations, sending shares for a dive (-13%) in after-hours trading trading. The Seattle retailer reported $1 earnings per share on sales of $35.7 billion. The consensus earnings estimate has been $1.58 per share on revenue of $35.98 billion.

News in oil prices continued to grasp headline slots today, as the price of oil gained a whopping 4.33%. The bullish buy-in for oil futures came when swirling speculation that the Organization of the Petroleum Exporting Countries (OPEC) could slash production. Still, even if OPEC reduces production, macroeconomic concerns, such as the sluggish economy in China and the deteriorating situation in Brazil, are likely to continue to keep prices at low levels compared to recent yearly averages.

8 of our 10 ETFs in the Spotlight managed to close on the plus side with Consumer Staples (XLY) gaining +1.28%. The loser of the day was Healthcare (XLV), which got clobbered at the tune of -2.33%.

Let’s see if there is more fallout from the Amazon debacle tomorrow.

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Volatility Slams Markets; Facebook Keeps Face

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks dove sharply into negative territory after the Federal Reserve signaled that it has not ruled out another interest rate hike at its March meeting despite noting that it is “closely monitoring” recent turbulence in financial markets and the global economy.

All major indexes fell at least 1.1% today, with the Nasdaq posting a striking 2.18% loss.

Wall Street had been hoping the Fed would use its post-meeting January policy statement to send a different message: that it would, in effect, dial back the prospect for a rate hike at its March meeting and lower the likelihood of four quarter-point hikes in total for the year. But the Fed didn’t go that far or wasn’t “dovish” enough, disappointing investors who responded by dumping stocks as the question marks related to Fed policy remained open.

In earnings news, Facebook (FB) shares just shot up 8% in after-hours trading after the giant social network said it earned 79 cents a share on revenue of $5.84 billion in Q4 2015, easily topping Wall Street estimates of 69 cents a share. Facebook is grabbing a larger share of a growing digital advertising market. Facebook will capture $9.86 billion in U.S. display ad revenue in 2016 for a 30.6% share of total spending in that market, says research firm eMarketer.

In airlines, we heard today that Boeing Co. (BA) reported $1 billion in Q4 2015 earnings, a 30% drop from a year earlier, due to sluggishness in the air cargo market. The company said it expects 2016 core earnings between $8.15 a share and $8.35 a share. Analysts were expecting $9.41 a share. The company’s stock closed down 9% to $116.58 a share.

All of our 10 ETFs in the Spotlight headed south after a 2-day bounce and closed in the red led by Consumer Discretionaries (XLY) with -1.56%. Resisting the sell-off the best was Consumer Staples (XLP) with a modest loss of -0.10%.

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Oil Reverses And Pulls The Major Indexes Higher

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

In a stunning reversal from yesterday’s sell-off, the likes of which I have described as typical in bear markets featuring big down days followed by big updays without clear long-term direction, oil rallied and pulled the indexes out of the doldrums with the S&P 500 reclaiming the 1,900 level. To be fair, strong earnings results from Johnson & Johnson, Proctor & Gamble as well as 3M contributed to today’s rebound.

Crude conquered the $31 level again on hopes that OPEC might be able to get a handle on the ever increasing supply levels, which to me is wishful thinking as I can’t recall an instance in recent history when OPEC managed to agree on anything that lasted more than a few days. In the end, if inventories build again all of a sudden, we may see the pendulum swing the other way pulling equities back down.

Unless, of course, tomorrow’s Fed announcement, after its 2-day FOMC meeting, contains a new recipe for potentially lower interest rates or a much hoped for new Quantitative Easing (QE) program.

All of our 10 ETFs in the Spotlight joined the party and closed up with the leader being the Mid-Cap Value ETF (IWS) with +2.26% while the laggard was Healthcare (XLV) with +0.76%.

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Oil Pushes Markets Down A Slippery Slope

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Oil continues to be the dominant market mover in the early days of 2016. Stocks ended lower Monday as oil prices dropped more than 7% and fell back to around $30 a barrel. The drop in oil prices of late is mostly due to global oversupply. It appears that none of the major oil producers are willing to cut production for fear of losing global market share, even though demand has decreased substantially over the past couple of months.

The drop in stocks comes shortly after Wall Street was able to finally bounce back last week in the market’s first week of positive returns for U.S. stocks in the New Year.  But the relief rally, while welcomed and much-needed, wasn’t enough for still-shaken bulls to go out on a limb and send a definitive all-clear signal. That type of signal could most likely only come from the Fed via promises of lower interest rates and/or a new Quantitative Easing (QE) program, despite the now well known fact that QE did nothing for the economy but was instrumental in lifting the fincancial markets to their lofty levels over the past 6 years.

Investors are gearing up for a busy week of earnings, and they’ll be looking beyond the numbers. More than 130 companies in the S&P 500 are scheduled to report their fourth-quarter results this coming week, including moguls like online retailer Amazon.com (AMZN), social media firm Facebook (FB) and tech giants Microsoft (MSFT) and Apple (AAPL). It’s still early in the profit season as only 73 S&P 500 companies have reported so far. Analysts are currently forecasting companies in the S&P 500 to report 5.9% lower fourth-quarter adjusted earnings.

All of our 10 ETFs in the Spotlight headed south led by the Financials (IYF) with -2.16%. Holding up reasonably well was Consumer Staples (XLP) with -0.89%.

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ETFs/Mutual Funds On The Cutline – Updated Through 01/22/2016

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 21 (last week 16) 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. 7 ETFs (last week 6) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 15 (last week 14) above the line and 766 below it out of the 781 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: Should Investors Be On Margin Or Leveraged?

Ulli Market Review Contact

ManGeopolitical risks can weigh heavily on capital markets, since investors that know less about China than the US are more concerned about the world’s second largest economy, said Leon Cooperman, CEO of Omega Advisors.

The Chinese market turmoil is very significant for what’s going on in China, but in terms of the global economy, it’s not as significant as people make it out to be. In 2014, rest of the world was worried about a bullish bubble while in 2015 investors were worried about Greece.

In 2016, the rage is China though the developments in US credit market is far more important for US investors. China’s effect on Global GDP is not significant though China’s effect on commodity prices were quite dramatic; stocks of oil, metals etc have been destroyed.

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