Major Index ETFs Hit Four In A Row Ahead Of Fed’s Minutes

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

U.S. equities moved higher for a fourth-consecutive day on Tuesday amid optimism companies will report better-than-forecast earnings for the second quarter after Dow member Alcoa bested the Street’s earnings forecasts. Investors are betting that companies will be able to surpass the low bar set for earnings season, leaving room for better-than-expected results that could drive the rally further.

The S&P 500 has recovered all its losses following a 4.8 percent drop between June 19 and 24. The push higher in recent days has taken the benchmark to 1 percent below its all-time closing high of 1,669.16 reached on May 21, the day before Bernanke told Congress the Fed could taper purchases.

Stocks advanced today despite an unexpected decline in small business confidence. The National Federation of Independent Business Small Business Optimism Index deteriorated in June, pulling back from the highest level in a year, declining to 93.5, compared to the improvement to 94.9 that economists had expected.

Hiring plans for the next three months, however, picked up to the best level since last August. Its six-month average also advanced, which suggests the unemployment rate could decline further this summer. Of course, the creation of part-time jobs will likely accelerate at the expense of full time employment as the difference between quantity and quality becomes ever so obvious.

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Bulls In Charge For 3rd Day—S&P 500 Nears All Time High

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

U.S. equities began today on a positive note, as last week’s upbeat U.S. labor report along with the start of corporate earnings season fueled increased optimism about growth in the world’s largest economy. It helped ease concerns about rising interest rates and the increased likelihood that the Fed will begin tapering its asset purchases. Stocks registered the bulk of their gains in the opening minutes and pushed the S&P 500 closer to its all-time high set in May.

The upbeat open was aided by a strong showing in Europe where major averages overlooked disappointing German industrial production data and rallied on indications the next tranche of Greek aid will be approved by Eurozone officials. However, stocks in Asia finished broadly lower. Concerns about Chinese economic growth ahead of this week’s release of a plethora of key reports for June may have kept sentiment in check, as well as some caution before the start of earnings season in the U.S.

Today’s economic calendar was light. Consumer credit, released in the final hour of trading, showed consumer borrowing expanded by $19.62 billion during May, the fastest pace in a year and more than the $12.50 billion forecast of economists, while April’s figure was adjusted downward to an increase of $10.87 billion from the originally reported $11.06 billion. Treasuries finished higher with interest rates pulling back from their recent rally, while showing little reaction to the consumer credit report. How about stocks?

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ETFs/Mutual Funds On The Cutline – Updated Through 7/5/2013

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 263 (last week 263) 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. 42 ETFs (last week 43) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 756 (last week 749) above the line and 103 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.

One Man’s Opinion: Will ECB’s Draghi Have To Put His Money Where His Mouth Is?

Ulli Market Review Contact

92835431European leaders have claimed the currency zone has moved out of crisis umpteen times in the past, only to be proven wrong later. The situation can be compared to a volcano that has lied dormant for a while only to become active all of a sudden, says Michael Hewson of CMC Markets. About a year ago European Central Bank President Mario Draghi had said he would do whatever “it takes” to preserve the euro. The markets are getting to a point where he might have to put the money where his mouth is, Mike said.

Asked if an annual declaration similar to last year’s could be expected, Mike said he doesn’t think it will suffice anymore. At some point, the markets are likely to test the efficacy of the OMT program (Outright Monetary Transaction program). The recent spike in Portuguese bonds, following the political turmoil in Lisbon, also indicates to an austerity fatigue in Europe. But an exit route (from the prolonged austerity program) is still not in sight because the debt levels are still unsustainable.

Both Portugal and Greece are struggling with high levels of debt. The International Monetary Fund, which is one of the constituents of the so-called troika, has a policy wherein it doesn’t participate in a rescue program if the debt levels are high. Portuguese debt is supposed to come down to 125 percent of GDP by 2015, but clearly even that’s not sustainable. So the IMF is most likely to refuse to participate in any bailout program again, Mike observed.

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New ETFs On The Block: Egshares Emerging Markets Dividend Growth ETF (EMDG)

Ulli Dividend ETFs Contact

146026450Emerging Global Advisors, the NY-based specialist ETF issuer known for its suite of emerging markets funds, has announced the launch of the EGShares Emerging Markets Dividend Growth ETF (EMDG), the second dividend fund after the EGShares Low Volatility Emerging Markets Dividend ETF (HILO).  The ETF, unveiled on Monday and listed on the NYSE Arca, gives investors exposure to developing market companies that are maturing and focusing more on raising dividends.

EMDG comes at a time when investors are casting their nets wider in search of yields and are willing to diversify their dividend yield sources. The ETF tracks the FTSE Emerging All Cap Ex-Taiwan Diversified Capped Dividend Growth 50 Index, a benchmark co-designed by Emerging Global Advisors and FTSE that represents the performance of 50 emerging market companies that have consistently demonstrated the ability to grow dividends over the past five years. Additionally, the companies are subjected to a series of screens to ensure future dividend sustainability.

To be included in the underlying benchmark – which is a free-float market capitalization weighted index, a company must first be a component of the FTSE Emerging All Cap Ex-Taiwan Universe. It must also have a compound annual dividend growth rate of six percent over the past five years. Constituent companies can be small -, medium -, and large-capitalized with each individual holding quarterly capped at 2.5 percent.

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07-05-2013

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, July 5, 2013

ETF/No Load Fund Tracker StatSheet

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

https://theetfbully.com/2013/07/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-07032013/?preview=true

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Market Commentary

Friday, July 5, 2013

JOB DATA CHEERS BULLS—BOND ETFS TANK AS INTEREST RATES SPIKE

After a holiday break yesterday, the major U.S. averages entered the weekend on a positive note. After choppy trading through much of Friday, which was marked by light volume, stocks rose sharply in late afternoon amid an allegedly strengthening labor market. The Dow Jones Industrial Average closed 147 points higher (1.0%) at 15,136. The S&P 500 Index increased 16 points (1.0%), the biggest rally in three weeks, to close above its 50-day moving average at 1,632. The Nasdaq Composite gained 36 points (1.0%) at 3,479.

The markets responded positive to robust jobs data that pointed to economic growth as investors overcame concerns that the Fed may begin scaling back its stimulus efforts as soon as September.

The much anticipated June’s employment report showed broad-based progress in labor market conditions. Nonfarm payrolls increased by 195,000, above the consensus of 160,000. Private nonfarm payrolls rose 202,000, and have increased 6.7% from the cyclical trough in February 2010. Private sector payrolls increased by 202,000 in June, versus the forecast of a gain of 175,000.

On the extremely negative side, the number of people working part-time for economic reasons jumped by 322,000. There were also increases in the number of marginally attached and discouraged workers. The unemployment rate remained at 7.6%, compared to the decline to 7.5% that economists had expected.

After the job release, treasuries sold off aggressively and spent the remainder of the session on their lows. The benchmark 10-yr yield jumped 22 basis points to end at 2.72%, its highest level since August 2011. Today’s jobs report also gave a notable boost to the dollar, sending the Dollar Index to a three-year high amid all-around greenback strength. What about stocks?

The financial sector settled higher by 1.8% after spending the entire session atop the leader board. Industrials registered a strong gain (1.5%) as transportation-related names drove the sector higher. Health care sector (+1.3%) also finished among the leaders as biotech companies outperformed.

On the flip side, the jump in yields contributed to weakness in the utilities sector, which ended lower by 0.5% after spending the entire day in negative territory. Two other rate-sensitive groups, consumer staples (+0.2%) and telecom services (+0.5%) spent some time in the red, but rallied into the close. Energy sectors rallied throughout the day amid ongoing clashes in Egypt.

For the holiday-shortened week, stocks climbed amid weak volume. The Dow rose 1.5 percent; the S&P 500 was up 1.6 percent and the Nasdaq composite advanced 2.2 percent. The markets have recovered nicely since the correction which started few weeks ago.

The economy is supposed to be back on track for growth as the Fed will likely to slow down its stimulus. Personally, I don’t see that happen yet as fundamentals are far from the point at which the economy could generate sustainable organic growth (growth without any stimulus).

Our Trend Tracking Indexes (TTIs) closed the week as as follows:

Domestic TTI: +1.24% (last week +0.84%)

International TTI: +3.70% (last week +2.88%)

My latest e-book “How to beat the S&P 500…with the S&P 500” has now been uploaded, and you can download your free copy here.

Have a great week.

Ulli…

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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

A note from reader Maghar:

Q: Ulli:  Your recent comment that normally conservative securities have shown twice the volatility, like SPLV was down about 8% compared to SPY about 4. I wonder how that could happen?

A: Maghar: We are having a totally distorted and manipulated market environment and risk on and risk off tendencies switch at a moment’s notice so that alleged less volatile ETFs all of a sudden can get very volatile.

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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/