One Man’s Opinion: Has China’s Experiment With Controlled Economic Slow-Down Been Successful?

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Man

The recent slump in Chinese markets has set off alarm bells across the world as indexes in the world’s second largest economy had soared this year.

China’s stock markets either under-performed or matched expectations when its economy was booming and began to surge when the economy started to show signs of a slowdown since the second-half of last year, showing the apparent disconnect between the economy and the stock markets, said Olivier Blanchard, chief economist at the International Monetary Fund.

Though the Chinese stock markets lack depth, they are not quite a casino. It went up 150 percent in the last year, which far exceeds any realistic assessment of the increasing dividends that shareholders could hope for. The bubble has burst, but only in parts, and it’s unlikely to have much effect on the Chinese economy.

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New ETFs On The Block: SPDR Euro STOXX 50 Currency Hedged ETF (HFEZ)

Ulli Currency ETFs, Equity ETFs Contact

Worldwide ideasState Street Global Advisors, a unit of State Street and the third largest US issuer of exchange-traded funds, recently jumped onto the currency-hedged ETF bandwagon with the debut of the SPDR Euro STOXX 50 Currency Hedged ETF (HFEZ).

The new fund comes with low fees, possibly to compensate for the delay in a niche that is dominated by WisdomTree, iShares and DB X-trackers euro-hedged funds.

HFEZ provides euro-neutral exposure in an index of the 50 most liquid stocks from 12 countries across the Atlantic and is the first hedged product from State Street. It’s basically the currency-hedged version of the $4.9 billion SPDR Euro STOXX 50 ETF (FEZ).

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ETF/No Load Fund Tracker Newsletter For July 10, 2015

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ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2015/07/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-07092015/

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Market Commentary

A VOLATILE WEEK ENDS UNCHANGED

Fri pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

One look at the above 5-day chart tells the entire story. We had huge swings in the market with the S&P 500 sporting a range of 40 points but ending just about unchanged.

Today’s broad rebound helped the indexes recover from a choppy week that saw a break below the widely followed 200-day moving average (S&P) with our Domestic Trend Tracking Index (TTI) getting ready to break into bear market territory. In the end, new optimism about another deal between Greece and its creditors provided the firepower to push the indexes back to their break-even point for the week.

Despite the stock market meltdown in China, where short sellers are now being threatened with jail terms, and the ongoing Greek saga, Fed chief Yellen reaffirmed that we are still on track in having to deal with an increase in interest rates at some point this year. Yeah, I believe it when I see it…

It was no surprise to see that all of our 10 ETFs in the Spotlight joined the bulls and closed higher. The leader was the Global ETF (IOO) with a gain of 2.37%; lagging the bunch were the Dividend ETF (DVY) and Mid-Cap Value (IWS), which both added a more modest 0.81%.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 07/09/2015

Ulli ETF StatSheet Contact

ETF/Mutual Fund Data updated through Thursday, July 9, 2015

TOC021915

If you are not familiar with some of the terminology used, please see the Glossary of Terms.

 

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY — since 10/22/2014

TTI

Our main directional indicator, the Domestic Trend Tracking Index (TTI), broke through its long-term trend line generating a “Sell” for this arena effective 10/14/2014, which was followed by a violent break back above the line on 10/22/14 generating a new “Buy.” It was a classic whipsaw signal, and you can read more on my blog as to the events as they were unfolding.

As of today, our TTI (green line in above chart) is positioned above its long term trend line (red) by +0.38% keeping us in the market with our established positions.

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A Great Beginning Followed By A Poor Ending

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The indexes raced out of the starting blocks with the S&P 500 shooting up 27 points as China’s efforts of stemming their market slide seemed to be successful—at least for the time being. Of course, as we all know, it’s very questionable as to whether these manipulative attempts, including harsh penalties for short sellers (that’s not a joke), have any long lasting effect. But, it’s central planning at its finest.

However, it gave worldwide markets some relief, but domestically, the rally faded all day and into the close, but we managed to stay above the unchanged line by a fraction.

Lending some support was renewed hope out of Europe that Greece might be able to wing some kind of deal, which would keep its membership in the EU intact. Well, we have heard many of those types of stories and until I see it, I won’t believe it. Nevertheless, the European markets also managed to close up pushing the International Trend Tracking Index (TTI) to within shouting distance of breaking back above its long term trend line (section 3 below).

9 of our 10 ETFs in the Spotlight participated in the rebound and closed higher. Heading the gainers was the Global 100 (IOO) with +0.64%, while the only loser of the day was the Dividend ETF (DVY), which gave back -0.18%.

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Equities Tumble—The International TTI Slips Into Bear Market Territory

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

For a change, at least on Wall Street, the problems in Greece seemed to have moved to the back-burner, while issues in China, such as their over 30% stock market slide in the past 3 weeks took center stage. The concern is that China’s equity slide will hurt their economy, the second largest in the world, and there will be more potential spillover risks from that fallout.

Unfortunately, yesterday’s dead cat bounce was confirmed as all gains were given back putting the S&P below its widely followed 200-day moving average. Souring the mood even further was a 3-1/2 hour malfunction of the New York Stock Exchange, followed by the Wall Street Journal going offline and United Airlines experiencing a computer glitch, which grounded their fleet of airplanes.

Then the FOMC released their minutes casting more uncertainty as to whether the economy was sufficiently strong to absorb a planned raise in interest rates. They did acknowledge, however, that uncertainty exists in regards to the pace of economic growth abroad and the open question as to whether Greece and its creditors would reach an agreement.

It was a day to forget; what matters to us is whether the current bullish trend can be sustained or not. Take a look at section 3 below to see how our Trend Tracking Indexes (TTIs) were affected by today’s session.

All of our 10 ETFs in the Spotlight succumbed to the bears and closed lower headed to the downside by Consumer Discretionaries (XLY) with -1.90%, while Consumer Staples (XLP) gave back the least but still surrendered -1.12%.

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