Early Rally Fades; Dow Up Nasdaq Down

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Equities closed mixed today as an early rally on Wall Street slowly faded and gave back strong gains. Stocks jumped early in the trading session after yesterday’s big rebound, as Wall Street digested favorable data on the services sector of the U.S. economy and reassuring comments from the European Central Bank. It seems though that investors are remaining cautious in anticipation of a key reading on U.S. employment that will be released tomorrow.

A lot is riding on this employment report, as a very strong report could give the Fed further ammunition to raise short-term interest rates for the first time in nearly a decade. Despite warnings from the IMF that the Fed should hold off on hiking rates, a continuation of good economic data in the U.S. will make the Fed’s decision that much more difficult.

In the tech world, Apple (AAPL) fans and investors both are gearing up for an Apple product unveiling next week. Most speculate that the unveiling will entail a new iPhone model, possible the 6S and 6S Plus. According to FactSet, analysts expect Apple will sell about 235 million iPhones in its upcoming fiscal year, which starts in October, up from 231 million in the prior year.

As you know, according to my Trend Tracking Indicators (TTIs), we are stuck in bear market territory and therefore positioned safely on the the sidelines. There are a variety of ways to determine a bear market and, one of my favorite writers, David Stockman, makes a case that “This Is Not A Retest—It’s A Live Bear!” It’s a great read.

9 of our 10 ETFs in the Spotlight were able to post gains in light of this roller coaster day. Taking top billing was Consumer Staples (XLP) with +0.68% while Healthcare (XLV) lagged with -0.71%.

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Dow Swings Back Into The Black

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

A tech rally today helped Wall Street stage a rebound that sent the Dow up almost 300 points and pushed the Nasdaq back into positive territory for the year. The rally was broad-based as all ten of the S&P 500 sectors rose with technology and industrials leading the way.

Investors were encouraged by several positive economic reports released Wednesday that provided evidence that the U.S. economy continues to churn along despite fears of an economic slowdown in China. Businesses added 190,000 jobs in August, according to payroll processor ADP. The private sector survey provided a preview of Friday’s government employment report on public and private employers, which is predicted to show gains of 218,000 jobs.

Those bullish on retail stocks and consumer spending will be keeping an eye on the shopping numbers that come in during the upcoming Labor Day holiday. While the biggest sales across the board usually come in on Black Friday, Labor Day has proven to be a time for big spending for shoppers.

Today’s rebound affected our 10 ETFs in the Spotlight positively as all of them shifted into reverse and closed higher. Leading the charge was Consumer Discretionaries (XLY) with +2.11%, while Select Dividend ETF (DVY) lagged with +0.95%.

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In True Form September Begins Shaky

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Well, the trading month of August was a wild ride for us all. August 2015 chalked up to be the worst month for the Dow since May 2010 and the stock market’s first 10% correction in four years. Investors remained nervous over fears of a move by the Fed to raise rates and stocks followed a global market selloff sparked by a weak manufacturing report out of China that raised fresh fears of a worsening slowdown in the world’s second-biggest economy.

The first trading day in September did nothing to ease fears on Wall Street. The Dow plunged 470 points and all indexes closed down nearly 3%. Sparking the negative market sentiment today was a report released overnight which showed that manufacturing in August in China hit a three-year low, exacerbating worries about the health of the world’s second-biggest economy and sparking fresh fears of a global growth slowdown.

Perhaps some positive news for those investors in food chains is that America’s Mexican-on-the-go powerhouse Chipotle (CMG) is rolling out a delivery service to universities. Chipotle has partnered with Tapingo, a food-delivery app specifically for the college market, to deliver its burritos, bowls and other menu items to 40 college campuses, the fast-casual chain said today. It will expand to more than 100 campuses by spring. Guacamole anyone?

For the second day in a row, there were no winners among our 10 ETFs in the Spotlight as the bear remained clearly in charge. It turned out to be a good time to be on the sidelines with all sectors getting clobbered. Taking the biggest spanking was the Global 100 ETF (IOO) with -3.18%, while Consumer Staples (XLP) “only” lost -2.05%.

That’s no surprise to us, as our Trend Tracking Indexes (TTIs) continue to be stuck below their trend lines and therefore in bear market territory. Please see more details in section 3.

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Markets Smash Hopes About Stability

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Uncertainty about the timing of Federal Reserve rate hikes and persistent fears about a China slowdown continued to weigh on financial markets after last week’s wild ride. Investors thought stocks may have stabilized by the end of last week, however, indexes tumbled and oil prices surged Monday as Wall Street closed out a volatile August with hefty losses that gave the S&P 500 its worst monthly performance since May 2012.

The losses were broad-based with nine out of the ten S&P sectors falling. Energy stocks were the only gainers as oil prices surged for a third straight day after the OPEC indicated they are prepared to discuss production levels. As a side note, Crude has jumped 27% in three days.

As for real estate, the sudden collapse in the Shanghai Composite and the devaluation of the yuan in the past month have led some to worry that it could cause trouble for the U.S. real estate. The reality is that potential capital flows from the turmoil in China can find safety in U.S. properties and the data speaks to it. Over the last 12 months, nearly $5.1 billion of $21.1 billion in commercial real estate investments coming from China has been allocated to the U.S market.

There were no green numbers to be found in our 10 ETFs in the Spotlight with all of them heading south. Faring the best was the Mid-Cap Value ETF (IWS) with a loss of -0.44%, while Healthcare (XLV) gave back the most by surrendering -1.82%.

Our Trend Tracking Indexes (TTIs) remain in bear market territory.

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ETFs/Mutual Funds On The Cutline – Updated Through 08/28/2015

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 410 ETFs, of which currently 41 (last week 36) 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.

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. 7 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 63 (last week 48) above the line and 757 below it out of the 820 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 The Time Ripe To Bottom-Fish Or Re-Enter The Equity Markets?

Ulli Market Review Contact

ManThe latest rebound in US equities is probably too early to do a victory lap though there’s no denying that valuations have improved pretty dramatically in the last couple of weeks, said David Lafferty, Chief Market Strategist at Natixis Global Asset Management.

With the S&P 500 trading at about 18 times forward earnings and the Dow at about 16.5/17 times, the market is surely not dirt cheap. But global quantitative easing over the last three to four years has made everything pretty expensive and this sell-off has helped a lot in getting investors back into the markets, he noted.

Asked where investors should seek value now if valuations are not “dirt-cheap”, David said this may not be the best time to bottom-fish since he’s a little longer on outlook. Natixis’ view across sectors hasn’t changed much and there are two sectors where there could be good value.

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