Rally Attempt Fails Miserably; But No Major Drops As Markets Run Out Of Time

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks rallied early in the day, but the momentum faded by closing time as investors remained jittery about global economic growth, conflict abroad and now ebola at home. This could have ended up to be a negative day had time not run out.

Ebola has had quite an impact on the human condition over the past month, but some investors are realizing some hefty gains on the disease. Lakeland Industries (LAKE) and Alpha Pro Tech (APT) make hazmat suits, which are full body suits that healthcare workers wear when treating diseased patients. Lakeland’s stock is one of the biggest gainers since the breakout of ebola, jumping up from $7 a month ago to as high as $28 and settling today at $21.43. Other manufacturers of these suits include DuPont (DD), Kimberly Clark Corp (KMB), and Honeywell International Inc. (HON).

With Black Friday around the corner, Macy’s (M) made the first aggressive move to seek higher profits, as it announced today that they will open stores earlier this year, at 6 pm on Thanksgiving to be exact. Macy’s is the first major retailer to announce store hours for the Black Friday weekend.

Finally, oil took a big hit today, as the International Energy Agency cut its demand forecasts for 2014 and 2015 by 200,000 and 300,000 barrels per day, respectively. Perhaps, this means a continued decline in prices at the pump.

With the markets having been on a breathtaking roller coaster ride, it’s better to be safe than sorry. Just today I saw a comment from a seasoned investor on another blog that described the current situation very well:

In the past 5 days, I’ve hit 15 of my trailing stops. I just placed another batch of sell orders. All I have left is mostly cash, precious metals, and bonds. I had a lot of energy MLPs in my taxable account and they have been massacred – oil, gas, coal, midstream – everything. Buy-write funds ditto [funds that use a covered-call options strategy]. I have a few stocks left, but it’s pretty skimpy.

But one thing I’ve learned to never ignore: trailing stops despite fear of a whipsaw. I have always regretted waiting.

There is a lesson in his comment.

7 of our 10 ETFs in the Spotlight managed to eke out a small gain as the mid-day rally shifted in reverse.

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Downward Trend Accelerates; Domestic Sell Signal Generated

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks resumed their recent trend of spiraling downward to begin this week. A late-day selloff on Wall Street smashed hopes for a rebound rally after last week’s plunge, which pushed major indexes closer to a 10% correction. All major indexes slipped as the chart above shows. As a side note, this marked the Dow’s fifth straight triple-digit move, of which only one of them was positive!

In tech, GoPro (GPRO) dropped 8% today on reports that a retired race car driver sustained serious head injuries while wearing one of the company’s cameras skiing last year. As you may know, the stock has been on a rapid uptrend since its IPO earlier this year. GoPro cameras are often mounted on the top of helmets worn by extreme sports enthusiasts.

In the air, Boeing (BA) announced on Sunday that it received a massive order from Guarda Indonesia for 50 jets that amounted to a purchase price of $4.9 billion. Garuda Indonesia currently operates 77 Boeing 737s. Specifically, the airline will purchase 46 737 MAX 8s and will convert existing orders for four Next-Generation 737-800s to 737 MAX 8s. The first delivery of a 737 Max to an airline is scheduled for 2017.

Anxiety on Wall Street has been accelerated by continued uncertainty about how markets will react as the Fed nears the expected end of its market-friendly bond- buying program later this month and plots its first interest rate hike sometime next year. Also, the increased presence of Ebola in the U.S. is not helping market uncertainties.

All of our 10 ETFs in the Spotlight headed south as the move into bear market territory intensified. For more details please see section 3 below.

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ETFs/Mutual Funds On The Cutline – Updated Through 10/10/2014

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 398 ETFs, of which currently 121 (last week 195) 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. 17 ETFs (last week 31) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 155 (last week 514) above the line and 695 below it out of the 850 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: Can The US Economy Grow At A Robust Pace Despite Global Weakness?

Ulli Market Review Contact

92835431The International Monetary Fund recently slashed global growth forecast amid slowdown in Europe and weakness in Japan. But lackluster global growth is unlikely to snuff-out the US bright spot, said Rick Reider, chief investment officer for fixed-income at BlackRock Inc.

The US economy is moving in a pretty robust fashion with energy and technology driving growth. A bottomed out housing market and a largely deleveraged system only adds to the positives. The economy has grown by about 3.8-3.9 percent in the second and the third quarter, which is far higher than the 10-year average of 1.6 percent. With unemployment rate at 5.9 percent, the Fed can make a move as most data point indicates these are not unusual times, he explained.

Asked to explain the conundrum of a falling unemployment rate and a falling labor participation rate that is pushing up the long-term unemployment rate, Rick said aggregate data generally gives good indications about the health of the economy. The US is essentially enduring a two-speed economy now. The skilled workers are doing exceedingly well while the less-skilled workforce is falling behind. The aggregate data shows things are improving though there is a bifurcation that is difficult to miss, he noted.

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New ETFs On The Block: Powershares Ladderite 0-5 Year Corporate Bond Portfolio (LDRI)

Ulli Bond ETFs Contact

95519646Invesco PowerShares, the IL-based fourth-largest US issuer of exchange-traded funds, recently launched a laddered-strategy bond fund that aims to preserve capital and generate consistent income in an uncertain interest-rate environment.

The newly-launched PowerShares Ladderite 0-5 Year Corporate Bond Portfolio (LDRI) invests in corporate bonds with 5 years or less remaining to their maturity and qualifies as a strategic-beta fixed income product.

LDRI’s portfolio consists of only investment-grade dollar-denominated bonds issued by companies domiciled in advanced economies, including the US, Canada, Japan and Western Europe. The passively-managed fund targets the short-end of the yield-curve and tracks the NASDAQ LaddeRite 0-5 Year Corporate Bond Index. It normally aims to invest at least 80 percent of total assets in short-maturity fixed-rate bonds that had at least $500 million in debt outstanding at the time of issuance.

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10-10-2014

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For October 10, 2014

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2014/10/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-10092014/

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Market Commentary

Friday, October 10, 2014

A VOLATILE WEEK—DOMESTIC TTI SLIPS INTO BEAR MARKET TERRITORY

Fri pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Well, here we are winding down one of the most volatile weeks we have seen since January. Equities are at a seven-month low and oil is at a four-year low. All of the major indexes dropped as the above 5-day chart shows. October has already achieved the “most volatile month for stocks” title since June 2013, with five daily up or down movements of 1% or more.

Despite a range of incoming data that signal the U.S. economy is improving, investors have grown increasingly concerned about growth in the rest of the world, particularly in Europe and China. One of the biggest shocks to the markets this week was the IMF’s adjustment to its global economic growth forecast down to 3.3%, which marks its fourth downward adjustment this year.

In tech, we heard this week that Samsung Electronics, the global leader in Smartphone sales, estimated a drop in Q3 operating profit of more than 50% from a year earlier. The mobile division’s profit is being severely curtailed on the low end by tough competition from Chinese vendors. On the high end, Apple’s popular new large-screen iPhone 6 Plus has reduced consumer appetite for Samsung’s flagship Galaxy S5, forcing the firm to cut product prices and spend more on marketing.

In regards to trend direction, our Domestic TTI just slipped below its long-term trend line and into bearish territory. Please section 3 below for more details.

Let’s look to next week to (hopefully) see some reduction in volatility as corporate earnings announcements get further under way.

9 of our 10 ETFs in the Spotlight slid with the indexes, one bucked the trend and one triggered its trailing sell stop as you can see in the YTD table below.

2. ETFs in the Spotlight

In case you missed the announcement and description of this section, you can read it here again.

It features 10 broadly diversified ETFs from my HighVolume list as posted every Monday. Furthermore, they are screened for the lowest MaxDD% number meaning they have been showing better resistance to temporary sell offs than all others over the past year.

Here are the 10 candidates:

MaxDD

All of them, except IOO, SPY, DVY, XLY, RSP, IWS, are currently in “buy” mode, meaning their prices are above their respective long term trend lines by the percentage indicated (%M/A).

Year to date, here’s how the above candidates have fared so far:

YTD

To be clear, the first table above shows the position of the various ETFs in relation to their respective long term trend lines (%M/A), while the second one tracks their trailing sell stops in the “Off High” column. The “Action” column will signal a “Sell” once the -7.5% point is taken out in the “Off High” column.

3. Domestic Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) followed the weak market tendencies, and the Domestic one joined its international cousin in bear market territory as of today. Since the drop below the line was fairly small, I will wait for a day or two to see if there is a rebound in the making in order to avoid a potential whip-saw signal.

If, however, the Domestic TTI slips lower, I will declare this Buy cycle, which started on 10/25/2011, to be over. That means we will exit our “broadly diversified domestic equity mutual fund/ETF” positions and move to the safety of our money market accounts for the time being. I will then evaluate and see if other investment opportunities exist; however, safety is first, since in my view the downside risk may be along the lines of what we’ve seen in 2008, or worse. Stay tuned for any updates.

Domestic TTI: -0.39% (last Friday +1.11%)

International TTI: -4.81% (last Friday -2.08%)—Sell signal since 10/1/2014

Have a nice weekend.

Ulli…

Disclosure: I am obliged to inform you that I, as well as advisory clients of mine, own some of these listed ETFs. Furthermore, they do not represent a specific investment recommendation for you, they merely show which ETFs from the universe I track are falling within the guidelines specified.

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READER Q & A FOR THE WEEK

All Reader Q & A’s are listed at our web site!
Check it out at:

http://www.successful-investment.com/q&a.php

Reader Steve:

Q: Ulli: I was reading through the “how to beat the S&P using the S&P and was thinking about capital gains. They wouldn’t be an issue in a 401K but could impact a standard investment account?

On the surface, I’m guessing that missing the downswings would far outweigh any tax consequences on the gains at sale?

Thanks for all the newsletters and commentary.  I appreciate that you share your insights.

A: Steve: Yes, I believe that avoiding the big drops is a far more important issue than tax consequences.

In my view, tax issues are secondary while protection and preservation of capital should always be the primary goal. Those that have experienced the bear markets of 2000 and 2008 can certainly attest to that.

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https://theetfbully.com/personal-investment-management/

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Back issues of the ETF/No Load Fund Tracker are available on the web at:

https://theetfbully.com/newsletter-archives/