Fed Signals Gradual Tightening—Indexes Inch Higher

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

It was a choppy session as the indexes rallied at first, pulled back mid-day, rallied again and sold off into the close but managed to stay above the unchanged line.

As expected, the Fed left interest rates unchanged while the commentary pretty much remained the same as in “we’ll watch economic data” and “the timing of rate hikes is not as important as the pace and trajectory,” and so on. In other words, the Fed managed again to avoid any commitment other then that the policy will be still accommodative.

In the end, the market reaction was relatively muted due to unchanged policy theme and, as has been the mode of operation in the past, the food presented was pretty much the same as last time.

9 of our 10 ETFs in the Spotlight inched higher again led by Consumer Staples (XLP) with a 0.54% gain. Only the Financials (IYF) ended up slightly on the minus side by losing 0.09%.

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Finding Upward Momentum

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Finally, the major indexes found some some lost upward momentum and closed higher in the face of unsuccessful Greek talks and the widely anticipated outcome of a two-day Fed meeting the results of which will be published tomorrow.

However, trading was cautious as volume remained very low. While the outcome of the Fed meeting is not expected to present any major surprises, market reaction therefore may be muted but volatility will definitely ramp up on Friday as options expiration day is lurking.

While the roller-coaster, AKA the Greek debt negotiations, can affect market direction, the main driver, however, is the Fed and its policies, which is why every word of the announcement will be dissected for any hidden hints.

All of our 10 ETFs in the Spotlight recovered and sprinted higher. Consumer Staples (XLP) was the leader gaining 1.09% while the Global 100 (IOO) trailed but added 0.13%.

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Markets Sour To Kick Off Second Week Of June

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Global markets started the week on a softer note after talks on the Greece bailout broke down on Sunday. The Dow Jones industrial average dropped 108 points to end back in the red for 2015 as both domestic and global concerns weighed on investors. Chief concerns include the ongoing stalemate between Greece and its creditors, and this week’s Federal Reserve meeting on interest rate policy.

The Fed kicks off a two-day meeting on rates tomorrow and will issue a policy statement Wednesday. Fed Chair Janet Yellen will also face off with the press after Wednesday’s meeting adjourns, and will discuss the Fed’s current economic outlook and hopefully provide investors with a road map as to when the Fed plans to raise rates and why.

In M&A news, we heard today that Target (TGT) intends to sell its pharmacy business to CVS (CVS) for $1.9 billion. Many analysts are claiming ‘bargaining power’ as one of the primary drivers behind the deal. With Target’s pharmacy distribution channels, CVS should have greater bargaining power with drug makers for lower prices, which could turn pharmacy margins upside down in Target stores. Pharmacies will remain in Target stores, but carry the CVS brand name.

9 of our 10 ETFs in the Spotlight headed south led by the Low Volatility ETF (SPLV) with a loss of 0.83%. Bucking the trend was Healthcare (XLV), which eked out a gain of 0.12%.

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ETFs/Mutual Funds On The Cutline – Updated Through 06/12/2015

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 260 (last week 247) 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. 43 ETFs (last week 41) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 533 (last week 513) above the line and 287 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: Does The Federal Reserve Want Longer-Term Interest Rates To Rise?

Ulli Market Review Contact

ManCentral banks in Europe and Japan have committed quantitative easing worth $1 trillion each while the People’s Bank of China has started with its own easing measures off late. When the money printing stops, liquidity would dry up, further exacerbating an already deteriorating global liquidity scenario, said Bill Gross, portfolio manager of Janus Global Unconstrained Bond Fund.

It’s natural to assume that central bankers wouldn’t stop the money supply if they knew markets would be hit by crises due to high volatility, but unfortunately central bankers don’t know exactly the way home. While global markets have benefited to the extent of trillions of dollars of liquidity over the past few years, investors need to wonder what happens when they don’t, he noted.

The current liquidity pumping by central banks and the subsequent behavior of markets can be metaphorically compared to a helicopter (central banks) – car (financial markets) chase in slow motion where the car never runs out of gas. Asked how long the current scenario is likely to play on, because many investors have been waiting for an end to easy monetary policy for a couple of years now thus missing out good opportunities, Gross said that’s the bane of portfolio managers.

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New ETFs On The Block: US Global Jets ETF (JETS)

Ulli Airline ETF Contact

Bull-BearUS Global Investors Inc, the Texas-based investment advisor to US Global ETFs, recently entered a niche where two previous players had earlier ventured and failed. The recently launched US Global Jets ETF (JETS), which also happens to be the firm’s first exchange-traded product, is designed to track the broad airline industry and follows the relatively new but increasingly popular so-called “smart-beta” investment strategy.

The US airline industry made a smart recovery since crude oil prices started to decline last year. To be sure, between 2005 and 2008, more than half of US carriers operated under Chapter 11 bankruptcy protection. But things started to improve on cost rationalization, enhanced cargo demand and a pick-up in the domestic passenger numbers as the US economy continued to heal after the economic crisis of 2009.

Data available from the NYSE Arca Airline Index show stock prices of airlines as a group more than tripled since 2012. In fact, in December last year airline stocks hit the highest intraday level since February 2001, according to financial news agency Bloomberg.

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