Markets Fail To Break Two Day Slide—Domestic TTI Slips Back Below Its Trend Line

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Hopes of halting a two-day slide were dashed today as an early stock rally, which now looks like a gigantic head fake, faded and the Dow finished near the bottom of a huge 300-point swing. The Dow was doing fine in the first half of the day, gaining as much as 200 points before sinking fast in the afternoon to as much as a 100-point decline. The S&P 500 vacillated within a range of 43 points, or over 2%. These types of moves tend to happen at major inflection points meaning the next breakout could produce a sharp move in either direction.

Oil prices remained volatile in Wednesday’s trading as financial markets have come under pressure this week on oversupply concerns after OPEC countries decided to maintain current production levels. Prices recouped some losses early though after the government reported that crude supplies fell for the first time in 11 weeks, dropping 3.6 million barrels last week. U.S Crude closed the day at $37.20 a barrel.

And in housing news, the prospect of higher interest rates may be nudging more Americans to refinance their mortgages. We heard from the Mortgage Bankers Association today that mortgage applications rose a seasonally adjusted 1.2% the week ending Dec. 4 and that the increase was driven by refinancing applications, which jumped 4% from the previous week. Although refinancings don’t directly bolster the housing market, they can help the economy by leaving more spending money in consumers’ pockets each month—at least that’s how the theory goes.

All of our 10 ETFs in the Spotlight succumbed to the sell-off and closed lower. Giving back the most were Consumer Discretionaries (XLY) with -1.28% while the Global 100 (IOO) held up best with a modest loss of -0.31%.

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Oil Prices Drag Markets Lower

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks ended down Tuesday but cut early sharp losses as financial markets came under pressure for a second straight day from volatile oil prices.

Oil prices fell 6% Monday and dropped as much as 2.7% to $36.64 a barrel in early trading today before reversing course and closing at $37.60 a barrel. The recent rout in oil prices was spurred by the decision by OPECers to leave production levels unchanged as oil stockpiles continue to rise, driving prices lower.

You may remember the big beer merger of late between Busch and Miller. Today, the CEO (Carlos Brito) of Anheuser-Busch InBev, told Senate lawmakers the proposed transaction between his firm and SABMiller, the world’s two largest brewing giants, wouldn’t stifle competition in the U.S. beer market. However, the planned $107 billion merger between the owners of got its first public scrutiny today with debate over whether the deal would freeze out local U.S. brands like Dogfish Head, Castle Danger and Rogue. Seeking to dismiss fears of unfair competition, Brito said regional craft beers accounted for less than 4% of the U.S. market in 1997, and have an 11% share now.

And in Mexican fast food news, it wasn’t a great day for Chipotle (CMG). Shares of the burrito chain, which had been one of the hottest stocks going since late 2012, has apparently turned into an investment hazard. They dropped 2.3% to $539.13, which places them at 29% lower from their high point over the past year.

Again, 9 of our 10 ETFs in the Spotlight headed south while one bucked the trend and closed up. Today, it was Healthcare (XLV), which managed to eke out a gain of +0.22%. Leading to the downside were the financials (IYF) with a loss of -1.12%.

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Sleigh Rides Are Never Smooth

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

While December is usually a favorable month for publicly traded stocks, it is never an easy “sleigh ride” through the New Year. Snow has its soft and hard patches, but it’s allegedly all worth the ride as they say.

The stock market took a stiff hit Monday as oil prices tumbled to a seven-year low, sparking a sell-off in energy stocks that mostly wiped out a chunk of Friday’s big rally that saw the Dow jump 370 points on a strong November jobs report.

Oil prices plunged nearly 6% today after OPEC decided last week not to constrain production, despite an oversupplied global market and reports that showed rising crude stockpiles in the U.S. Domestically, the Benchmark U.S. crude index dropped $2.32, or 5.8%, to $37.65 a barrel, which was the first close below $38 a barrel since early 2009.

In the M&A space, we heard today that Keurig Green Mountain (GMCR), which manufactures coffee-makers and instant flavor pods, has agreed to be purchased for $13.9 billion by an investment group led by private-equity firm JAB Holding Co. The deal marks nearly a 78% premium over Friday’s closing price for Keurig shares. The stock rose 72% to close Monday at $88.89.

All eyes remain fixed on the Fed’s meeting later this month regarding a potential interest rate hike. But let’s not let that damper the holiday spirit. Holiday shoppers are out across the nation, but it’s uncertain whether we’ll get enough positive numbers on holiday sales come early January.

9 of our 10 ETFs in the Spotlight reversed and headed south as oil pulled the indexes off their lofty levels reached last Friday. Bucking the trend was Consumer Staples (XLP) with +0.28%; the downside leader was the Mid-Cap Value (IWS), which gave back -1.27%.

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ETFs/Mutual Funds On The Cutline – Updated Through 12/4/2015

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 110 (last week 120) 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 some 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. 18 ETFs (last week 20) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 293 (last week 330) above the line and 507 below it out of the 800 that I follow.

Take a look:

  1. ETF Master Cutline Report
  2. ETF High Volume Cutline Report
  3. MF Cutline Report (if embedded link does not work, use: https://theetfbully.com/Tables/MFCutline12042015.pdf

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 A Fed Rate Hike Be Positive For Equities?

Ulli Market Review Contact

ManAt the upcoming December 15-16 FOMC meeting, Fed Chair Janet Yellen is likely to reiterate what she said at the Congressional testimony which is that the economy is expanding at a moderate pace and they made significant improvement in terms of reaching full-employment, said Michelle Meyer, deputy head of US economics at Bank of America Merrill Lynch.

Inflation is so low they think conditions warrant the beginning of the cycle. But really the conversation is how the path would look like. And that really still sounds pretty cautious. Yellen’s latest comments suggest that there’s really no promise in terms of how quickly the Fed’s going to hike rates.

Policymakers do want to see an environment where inflation is starting to pick up, and they want to have confidence that some of the downside risks from abroad have truly abated. So while they go in December, there will be a question about how quickly the cycle ends up looking, she noted.

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New ETFs On The Block: IQ Leaders GTAA Tracker ETF (QGTA)

Ulli International ETFs Contact

91551519IndexIQ, the New York based asset manager that launched the world’s first liquid alternative exchange traded fund that replicated hedge fund strategies, recently unveiled another unique investment methodology to expand their offerings in the alternatives/multi-assets category.

The newly launched IQ Leaders GTAA Tracker ETF (QGTA) aims to match the performance of leading global allocation mutual funds.

QGTA tracks a proprietary index developed in-house, the IQ Leaders GTAA Index. The index, in turn, tries to replicate the performance of the 10 leading global allocation mutual funds based on fund performance and asset size. However, the new ETF does not invest in the mutual funds itself; rather it invests in a portfolio of highly liquid and low-cost ETFs which, when considered in entirety, replicates the aggregate performance of the mutual funds.

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