Going Nowhere

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

It was a slow pre-Holiday session with the major indexes trending to the upside intraday but ending just about unchanged. Volume was extremely low.

Economic data were mixed but Wall Street still believes that the Fed remains on track to raise rates. All eyes are on next week’s jobs report which, should it come in better than expected (200,000), may turn out to be the final nail in the interest rate coffin.

The markets will be open this Friday for a half-day session.

6 of our 10 ETFs in the Spotlight squeezed out a gain in this non-directional session. Leading to the upside was Healthcare (XLV) with +0.54%, while the Global 100 (IOO) slipped -0.09%.

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Major Indexes Stay Afloat Amidst Terrorism

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The 3 major u.s. benchmarks eked out small gains today by the closing bell, as geopolitical risk weighed on financial markets. The shooting of a Russian fighter jet by turkey entrenched the post-paris terrorism threat and coming interest rate hikes on wall street’s worry list today.

The latest geopolitical flash drove stock prices down in Europe and in early trading in the U.S. and sparked a rally in oil, which set off a flight to safe-haven assets, such as U.S. and German government bonds. The sharp drop early on did not last, and the indexes slowly climbed out of a deep hole; in my view only because of seasonal tendencies as economic data was questionable to say the least.

In the tech world, we heard from Hewlett Packard (HPQ) today that revenue for the two-tiered organization in Q4 was down, year over year, and profits were at the low end of analysts’ estimates, which may reaffirm the necessity for the 76-year-old computing pioneer’s recent split. The combined company has reported a revenue decline in 16 of the past 17 quarters. Since the official split more than three weeks ago, HPE shares have tumbled 8% to $13.85. Shares of (HPQ), which sells PCs and printers, have surged 16% to $14.23.

7 of our 10 ETFs in the Spotlight edged higher and 3 closed down. Leading on the plus side was the Mid-Cap Value (IWS) with +0.42%. Slipping the most was the Low Volatility S&P (SPLV) with -0.28%.

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Markets Quiet After Booming Week

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Wall Street, coming off its best weekly gain of the year, which was preceded by its worst one, kicked off the Holiday-shortened week in a cautious mood, as investors digested a record deal in the pharmaceutical space and kept a close eye on Europe, where the terrorism threat remains real.

It seems to me that Wall Street is in a tug of war at the moment, with the market benefiting from what has historically been a good seasonal period for stocks, but being held back by a market driven by just a handful of stocks, geopolitical risks and continued price pressures in the commodities space. At the same time, we are close to reaching the upper end of the trading range for he S&P 500 and need to see whether this glass ceiling will be broken or not.

U.S. Crude Oil dropped about 2.84% today to close at just under $40 a barrel. This means that prices could remain under $2 a gallon throughout most of the country this week.

In M&A news today, pharmaceutical giants Pfizer (PFE) and Allergan (AGN) are on the verge of announcing the largest healthcare merger in history. The merger would allow Pfizer to transfer its headquarters from the U.S.A. to Ireland. The $160 billion deal has raised eyebrows about the tax-saving strategy it entails, but it appears at present that the deal will reach the finish line.

6 of our 10 ETFs in the Spotlight closed up led by Consumer Staples (XLP) with +0.88%, while the downside leader was the Global 100 (IOO) sporting a loss of -0.60%.

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ETFs/Mutual Funds On The Cutline – Updated Through 11/20/2015

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 107 (last week 22) 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. 21 ETFs (last week 5) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 277 (last week 61) above the line and 523 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

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 Stronger Dollar And Higher Interest Rates Trigger A Correction In US Equities?

Ulli Market Review Contact

ManInvestors may not have realized but something interesting happened in the third quarter of 2015; corporate earnings declined year-over-year in the July-September quarter for the first time since July 2009.

While one quarter doesn’t show a trend, earnings quality going forward doesn’t certainly look good, said Larry McDonald of Societe Generale. Financial engineering by S&P 500 companies have been stretched to the limit through tax inversions, buybacks and dividend payouts; they generated a ton of earnings momentum over the last three years, pushing valuations to a record high.

But now markets have reached to the point where valuations are “at the bone” and the quality of earnings is progressively getting worse, he noted.

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New ETFs On The Block: FlexShares US Quality Large Cap Index Fund (QLC)

Ulli Equity ETFs Contact

Financial DataInvestors that are increasingly betting on a US recovery in the midst of a turbulent global economic scenario possibly should focus on large-cap US companies as part of their core holding. While there are nearly 120 exchange-traded funds that focuses on large-cap US equities through a variety of strategies including fundamentals, size, value, growth, sector, size, earnings, dividend yields etc, a fund that targets multiple factors were missing from the mix.

FlexShares, the ETF issuing arm of Northern Trust, recently launched a large-cap focused multi-factor smart-beta fund to fill the void. The FlexShares US Quality Large Cap Index Fund (QLC) seeks exposure in US large caps that exhibit distinguishable quality, value and momentum characteristics. The quality factor has always been under the lens of long-term investors and thanks to exchange-traded funds, they have also become most accessible off-late.

Quality of stocks is generally measured by a firm’s ability to maintain and raise dividend payouts though it must be mentioned that application of quality factors is still pretty much evolving among investors. FlexShares applies three criteria to measure quality: cash flow, profitability and management efficiency.

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