Markets Hold Strong Despite Paris Event; Is A New Domestic “BUY” In The Making?

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Financial markets have held up well so far this week after the attacks in Paris Friday that sparked global concern about the economic impact of terrorism. Stocks moved higher Wednesday after the release of the Fed minutes of October, as the Dow logged a third straight day of gains and the S&P 500 moved back into the black for the year.

According to minutes of its October 27-28 meeting, the Federal Reserve policymakers agreed that the economy and labor market “could well” be strong enough to withstand a hike in interest rates in December. The officials said global troubles had eased and a delay could increase market uncertainty and undermine confidence in the economy.

The Fed also has expressed concern about persistently low inflation and said it must be reasonably confident inflation will return to the Fed’s 2% goal in the medium-term. That’s all it took and equities went into rally mode. Of course, we know that the Fed and not economic data determine market direction, as general macro data are showing anything but strength. Some analysts seem to think that the Fed needs to hike in order to save face; after all, you can only cry “wolf” so many times before you lose credibility.

Be that as it may, the question for us is whether the reboud of the last 3 days will provide enough momentum in order to break us out of the trading range in which we’ve been stuck for several weeks. With the Domestic TTI now having ventured again above its trend line by a fraction, after spending only 5 days below it, I will want to see more staying power accompanied by a stronger piercing of the line before issuing a new “Buy.” Stay tuned for more details.

All of our 10 ETFs in the Spotlight jumped higher with the leader being Healthcare (XLV) with a gain of +1.95%, while the Dividend ETF (DVY) lagged a little but gained +1.34%.

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Indexes Drag On Oil And Terror Fears

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

An early follow through rally from yesterday ran into resistance despite strong earnings from Wal-Mart and Home Depot. Falling oil prices and the evacuation of a soccer stadium in Germany, rekindling more terror fears, proved to be too much of a negative.

Other data offered a mixed view of the U.S. economy with consumer prices increasing (after declining for 2 straight months) and industrial production falling. Of course, every upcoming data point is dissected to see if it might affect the Fed’s decision on interest rates in December.

3 of our 10 ETFs in the Spotlight eked out a gain today led by Healthcare (XLV) with +0.43%. On the loser’s side, the Dividend ETF (DVY) took dubious honors by dropping -0.91%.

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Markets Bounce Back After Shaky Week

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

I received a number of emails from readers over the weekend being glad to be out of the market especially in view of the sudden tragic events in France. The general theme was that the indexes would take another hit, but that was not to be. While the futures pointed to a lower opening, momentum turned positive, and the markets never looked back despite dismal economic data (Japan in the 5th recession in 5 years and poor US manufacturing data).

All major U.S. indexes gained more than 1% to start the week, recovering from a volatile week prior. Oil prices were a prominent mover today and led the energy sector higher as U.S. crude rose about 2.45% to close at $41.74 a barrel.

As you would expect from any ground shaking terrorist attack, the airline industry took a blow today following the news from Paris last Friday. Shares of American Airlines (AAL), Delta Air Lines (DAL), and United Continental (UAL) had already started to give up their October gains last week, and they all fell again by 2%-3% today. In Europe, Air France and British Airways owner IAG lost 5% and 3% respectively. French hotel group Accor also lost 5%.

The big question: Is today’s rebound simply a dead cat bounce or the beginning of another trend reversal? We won’t know and will remain on the sidelines until we get confirmation that a new uptrend is indeed in place. The chart patterns, the volatility as of recent and the non-directional meandering appear to point towards one thing: A final blow-off in this bull market. As I was pondering this possibility, I came across this piece titled Stock market enters final bull market stage.

In a reversal from last week, all of our 10 ETFs in the Spotlight followed the indexes higher led by Consumer Staples (XLP) with +1.71%, while Consumer Discretionaries (XLY) lagged with +1.21%.

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ETFs/Mutual Funds On The Cutline – Updated Through 11/13/2015

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 22 (last week 97) 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 97 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. 5 ETFs (last week 17) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 61 (last week 315) above the line and 739 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: Is There A Strong Disconnect Between High-Yield Valuations And Fundamentals?

Ulli Market Review Contact

ManThe Fed is expected to hike rates in December as the stars have aligned over the past few weeks: the Fedspeak, the economic data and markets are all priced-in and well anticipated and nobody would be surprised, said John Bellows of Western Asset Management.

But the bigger question remains what would drive long-term bond yields and it’s unlikely a 25 basis points change at the front-end of the yield curve would make a big impact to 10-year and 30-year maturity bonds as they are driven much more by inflation and growth. Investors would be better served if they look at fundamentals rather than focusing on the Fed, he noted.

US 10-year Treasury yields have jumped to more than 2.3 percent, indicating the bond-market has already moved even though the Fed has not officially moved yet. Asked to comment, John said investors need to look at different asset classes from a perspective; equities have generally done quite well in a risk-on environment and economic data have stabilized, which have contributed to the upward pressure on yields as well.

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New ETFs On The Block: ProShares S&P 500 Ex-Sector ETFs

Ulli Sector ETFs Contact

91551519Investors that believe in passive investment strategies by replicating the broader US market – the S&P 500 index – may not be very happy about the market’s performance year-to-date. Relentless worries over global growth, be it China, Japan, Europe or the emerging markets, the index got hammered several times this year.

Empirical data show severe downturn even in one sector is good enough to bring the markets down to their knees; for example at the turn of the century it was the tech/dot-com bubble, and more recently in 2008 the sub-prime crisis in the financial services sector triggering a full-blown global recession.

Needless to say, amidst such historical evidence, debates are raging if the plunging oil prices and accompanying defaults by energy companies could spark another financial crisis. Hence excluding certain sectors that are likely to underperform could be one obvious investment call.

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