Oil Prices Tumble And Markets Get Slammed

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The lack of correlation between oil prices and the major indexes I pointed out yesterday reversed with a vengeance as oil dropped another 5.79% on top of yesterday’s loss of 6.78% causing the markets to head south all day with no recovery in sight.

Crude oil stumbling below $30/barrel accelerated a downdraft in energy and banking shares and even strong gains from Google’s parent Alphabet, Inc. were not able to stem the bearish tide.

The current market concerns range from the realization that Japan’s new NIRP (Negative Interest Rate) policy may very well spell the end of the stimulus cycle (QE) and not just economies around the world will have to learn to do without it but also equities, which have become addicted to a constant flow of Fed QE juice over the past 7 years.

It looks to me that the major stock indexes will have a hard time justifying current price levels without any further Fed assistance of easy money. In other words, the bear market appears to be just in its beginning stages.

Our 10 ETFs in the Spotlight headed south and closed unanimously in the red. Heading the group was the Financials (IYF) with -2.45%. Resisting the sell off fairly well was the Dividend ETF (DVY) with -0.90%.

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Clawing Back

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

It did not look pretty at the opening with the major indexes taking a dive after Friday’s come back rally. Interesting to me was the break in correlation with oil prices, as oil got hammered at the tune of -6.78%, yet equities managed to dig themselves out of a hole and closed essentially unchanged.

If you thought there was some good news to function as a driver of this rebound, you would have been wrong. Domestic and global economic data were simply deplorable with China showing fresh signs of continued sluggishness and U.S. manufacturing data sinking into the basement. The latter was seen as “encouraging” in regards to the possibility of the Fed holding off further planned rate hikes.

Not to be outdone, Fed chairman Fischer, one of the hawkish types, commented that “the market’s expectations of barely any interest rate increases this year could turn out to be right.” Well, that was sufficient jawboning to talk the indexes out of their early doldrums and up we went. Obviously, whatever the Fed’s plans may be, their effects do supersede any economic realities for the time being.

Our 10 ETFs in the Spotlight were mixed with 5 of them rising and 5 of them falling. Leading to the upside was Consumer Discretionaries (XLY) with +0.61% while the US Financials (IYF) led to the downside with -0.47%.

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ETFs/Mutual Funds On The Cutline – Updated Through 01/29/2016

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 38 (last week 21) 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. 8 ETFs (last week 7) 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: Will The Federal Reserve Continue With Rate Increases?

Ulli Market Review Contact

Man

The latest US-made durable goods reading was disappointing for the economy and showed businesses were pulling back even further than investors anticipated going into 2016, said Lindsey Piegza, chief economist at Stifel Fixed Income.

Beyond the headline number, the details were more disappointing as capital goods orders, excluding aircraft and defense, a proxy used by investors for business investment, were deeply negative and were down nearly 7 percent on annualized basis in the three months ending December.

The latest report is a validation that businesses continue to exacerbate the long standing trend of being uncertain about the economy and sitting on the sidelines amid a perfect storm. A strong US dollar and tepid demand – both globally and at home, along with a sizable inventory overhang are the perfect recipe for weak business investment.

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New ETFs On The Block: Elkhorn FTSE RAFI US Equity Income ETF (ELKU)

Ulli Income ETFs Contact

Investing

Elkhorn Capital Group, the exchange-traded fund issuer founded by former PowerShares’ veteran Ben Fulton, launched its second fund recently with an eye on high-dividend paying US companies.

The newly launched Elkhorn FTSE RAFI US Equity Income ETF (ELKU) employs an investment strategy created by Research Affiliates, one of the pioneers of the so-called smart-beta investing.

ELKU tracks the FTSE RAFI US Equity Income Index, a gauge derived from the FTSE US All Cap Index and jointly developed by Research Affiliates and FTSE Russell. The index aims to offer risk-managed exposure to high dividend paying US companies after screening fundamentals.

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ETF/No Load Fund Tracker Newsletter For January 29, 2016

Ulli ETF Tracker Contact

ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2016/01/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-01282016/

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Market Commentary

A BITTER SWEET END TO A GRIM JANUARY

Fri pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The Dow, posting its worst January since 2009, ended up nearly 400 points to cap a turbulent month on an upbeat note after a surprise interest rate cut by the Bank of Japan and despite a report showing weak fourth-quarter U.S. growth.

It appears that the Dow is still in correction mode, or down more than 10% from its peak. A weak January typically does not bode well for stocks for the remainder of the year. As the saying on Wall Street often says: “As January goes, so goes the market” for the rest of the year.

The big and unexpected headline Friday was a move by Japan’s central bank to push interest rates into negative territory (NIRP) in an effort to boost economic activity, combat dangerously low inflation and spur more bank lending. The Bank of Japan followed the policy path of the European Central Bank, in pushing the rate for deposits down to -0.1% for current financial firms that have cash deposited at the BoJ. A negative interest rate means depositors pay the bank to keep their money at the bank.

Of course, as we all know by now pushing rates to zero or even negative has done nothing to spur organic economic growth in the past, but it has done everything to support the financial markets. I suspect that today’s euphoric reaction will give way to reality in the near future and this day may very well be remembered as one to get out of the markets before the bear rears its ugly head again.

All of our 10 ETFs in the Spotlight participated in today’s buying panic and closed higher. The top dog of the day was the Financials (IYF) with +3.09%, while Consumer Staples (XLY) lagged with +1.09%.

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