Euro Continues To Climb—Equities In The Red—Facebook To Join S&P 500

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

Domestic Equities posted their largest drop in a month, with traders locking in recent gains after a provisional budget deal out of Washington. The bipartisan budget agreement reached late Tuesday would end three years of political confrontations and fiscal instability in Washington. The final Fed policy statement of the year is expected on December 18, at the end of a two-day meeting. It seems as we head toward the end of FY2013 that people are more concerned about locking in profits in positions that have had big gains this year.

In one of the few items of market-moving news on Wednesday, Costco’s (COST.O) profit missed Wall Street’s estimates because of higher stock-based compensation expenses and spending on technology. Its shares fell 1.2 percent to close at $118.57.

The euro rose for a seventh straight session against the dollar on Wednesday, driven by higher money market rates and a growing belief that the European Central Bank will keep interest rates low for some time but not cut them. The euro is at a six-week high and within striking distance of its best level versus the dollar in over two years. However, the euro zone still faces a long road to recovery, given the recent weak economic data, particularly in France.

ETF’s ended mostly in the red today with only Consumer Staples bucking the trend and showing gains of 0.16%. Facebook will join the S&P 500 on Dec. 20th. Facebook’s entry into the S&P 500 means the stocks will soon be found in some of the largest ETFs, including the largest in the world, the $166.1 billion SPDR S&P 500 (SPY) and the $51.2 billion iShares Core S&P 500 ETF (IVV).

All of our ETFs in the Spotlight slipped with the exception of Consumer Staples (XLP), which closed on the plus side:

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Twitter Up, Inflation Down

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

Stocks slipped in mixed volume as investors weighed a rise in job openings against concerns that the Federal Reserve will start to withdraw stimulus.

In the stock market today, Lumber Liquidators (LL) plunged 14% in huge volume, closing below its 200-day moving average, after its fourth-quarter earnings outlook came in slightly below expectations. Meanwhile, firearms maker Smith & Wesson (SWHC) was up sharply in post-session trading after its fiscal second-quarter earnings topped views. MasterCard (MA) was also up in the post-session after announcing a 10-for-1 stock split and boosting its quarterly dividend by 83%.  Elsewhere, November new issue Twitter (TWTR) jumped 6% to a new high, blowing past a 50.19 buy point in a narrow IPO base.

Inflation has fallen to a four-year low of 1%, with core inflation just 1.7%, according to the latest consumer price index. With inflation continuing to cool, the Federal Reserve wants to see faster price gains. But the central bank may quietly favor a big inflation spike to rev up the economy. In the current sluggish economy, companies are hoarding cash and consumers are paying down debt. Inflation expectations would encourage businesses to invest to take advantage of lower — possibly negative — real interest rates.

In the ETF world, BNY Mellon has been named to support the db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) by providing custody, fund accounting, administration, and transfer agency services. The fund, launched on NYSE Euronext on 6 November, is the first Renminbi Qualified Foreign Institutional Investor (RQFII) exchanged-traded fund available to US investors to invest in physical Chinese equities listed on the Shanghai and Shenzhen exchanges. Don’t forget, BNY Mellon is the primary service provider to Deutsche Bank’s ETF business in the US, which now encompasses 27 funds.

Our ETFs in the Spotlight eased a bit as the YTD table shows:

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Stocks Edge Slightly Higher; Sysco To Buy US Foods

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

Stocks ended slightly higher on Monday as investors awaited more clues from the Federal Reserve on whether the central bank will soon begin to wind down its economic stimulus. Perhaps the largest bit of news today was in the food industry where Sysco Corp announced it will buy US Foods Inc for about $3.5 billion from its private equity owners. This deal will combine the top two U.S. food distributors and create a company commanding at least a quarter of the $235 billion North American market.

The Nikkei is up nearly 51 pct year-to-date and is thus headed for its best yearly gain since 1972.  The decrease in the Yen largely spurred the Nikkei’s climb today. Declines in the yen tend to boost sentiment towards Japanese equities because investors expect the weaker currency will inflate overseas earnings for exporters.

Markets looked better in Europe today as European shares edged up from the previous session with Chinese export data encouraging investors to anticipate stronger global growth. China’s exports handily beat forecasts in November and an unexpected drop in consumer inflation eased fears of any imminent policy tightening, helping to sustain a rally in global shares which had been fuelled by estimate-beating jobs data from the United States on Friday.

In ETFs, the top moving funds were the (AGA) PowerShares DB Agriculture Double Short, the (UGAZ) VelocityShares 3x Long Natural Gas ETN and (once again) the (NUGT) Direxion Daily Gold Miners Bull 3X Shares.

Our ETFs in the Spotlight edged up as well with two of them making new highs for the year:

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ETFs/Mutual Funds On The Cutline – Updated Through 12/6/2013

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 334 (last week 332) 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 93 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. 67 ETFs (last week 67) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 774 (last week 791) above the line and 76 below it out of the 859 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: Will The Equity Rally Continue Next Year?

Ulli Market Review Contact

92835431Friday was a fascinating day, because this was the day when the markets made up their mind that growth is good, said Jeff Korzenik, chief investment strategist at Fifth Third. But what is particularly interesting is that the markets are not afraid of the taper, as exemplified in the bond market today. This has a lot of implication for sector selection and where rates can go, which is the right call, Jeff noted.

Normally Treasury yields would not go higher if tapering is happening, irrespective of whether it is good or bad. Asked to comment on it, Jeff said tapering had relatively little impact on the bond market.

Clearly quantitative easing/asset purchases have continued even as Treasury net issuances have declined and that signifies supply and demand is not the dominating effect anymore. After decades in the bond market, supply and demand seem to be a tertiary factor. What’s really important is nominal GDP and the markets are trading-off of a 4-year average; bonds are going higher because there’s a growth in nominal GDP again. That being said, there’s unlikely to be runaway yields in the near term given the level of inflation so far, and the markets have finally figured that out, he observed.

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New ETFs On The Block: Global X FTSE Portugal 20 ETF (PGAL)

Ulli Country ETFs Contact

91551519Global X Funds, the New York-based issuer known for its focus on emerging markets and niche strategies, has introduced the first ever Portugal specific equity ETF listed in the US.

Some analysts believe the so-called PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) in the 17 member currency zone have turned a corner and Portugal is at a point of inflection where Lisbon will be able to generate positive GDP growth in 2014, making valuations relatively cheap for this small European nation.

Also ETFs focused on the other members of the group, notably the iShares MSCI Spain Capped ETF (EWP), the iShares Italy Capped ETF (EWI) and the Global X FTSE Greece 20 ETF (GREK) have managed to outperform the markets with GREK rising more than 40 percent over the past twelve months.

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