Traders Say “Thanks, Fed”

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

Domestic equity markets erased early losses and closed the trading session solidly higher after the Federal Open Market Committee failed to announce plans to reduce the pace of its asset purchases, as many had expected.

The S&P 500 jumped 1.2%, erasing an earlier decline of as much as 0.3 percent and closing at a record high of 1,725.52. Trading volume today reached a one-month high. Meanwhile, investors digested a softer-than-forecasted read on U.S. housing construction, which overshadowed a rebound in domestic mortgage applications, while Treasury yields were lower.

Although the Federal Reserve did not make a tapering announcement, the policy statement did contain updated economic projections. Notably, the forecast for 2013 and 2014 GDP was lowered with the Committee expecting this year’s growth between 2.0% and 2.3% (2.3%-2.6% June forecast) and 2014 growth ranging between 2.9% and 3.1% (3.0%-3.5% June projection). Mr. Bernanke said economic data received since June has not been strong enough to justify scaling back asset purchases just yet. The Fed Chairman also said that recent tightening of financial conditions, as well as the ongoing fiscal uncertainty, played a part in the decision to maintain asset purchases.

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7 ETF Model Portfolios You Can Use – Updated through 9/17/2013

Ulli Model ETF Portfolios Contact

Last month’s sell off has long been forgotten as the S&P 500 has now made up all of the losses occurred in August. Since last week’s Model ETF Portfolio report, the benchmark index not only added another 1.25% but also reclaimed its psychologically important 1,700 level.

Right now, all eyes are off Syria and the focus is on the results of today’s Fed meeting, where Wall Street will have to deal with the fact that a reduction in QE is pretty much a foregone conclusion, but the question is by how much.

The current view is that it will be a reduction of some $10 billion a month, a figure the markets appear to have priced in. If it’s not worse than that, we may see a relief rally with the potential of the S&P 500 making a new high. If it’s more than $10 billion, a sell off will be almost a certainty.

Here’s the latest ETF Model Portfolio update:

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Stock Indexes Quietly Advance Ahead Of Fed’s Decision

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

Amid a benign read on consumer price inflation and a report that showed homebuilder sentiment remains near an eight-year high, U.S. equities advanced on Tuesday on expectations the Federal Reserve will make only moderate changes to its stimulus at the conclusion of its two-day meeting.

There wasn’t a whole lot of trading action as volume was light. Meanwhile, Treasuries saw modest gains ahead of the Fed’s decision and following the data. In equity news, Dow member Microsoft announced a 22% dividend increase and a new $40 billion share repurchase program.

The S&P 500 closed above the key resistance level of 1,700 for the first to since August and is 0.3 percent below its record high of 1,709.67. It is only fitting perhaps that the S&P 500 sits on the cusp of a new all-time high just as the Fed is presumably on the cusp of cutting back on its asset purchases.

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Major Indexes Rise On Prospective Fed Chairman Summers Withdrawal

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

One uncertainty factor was removed from the markets today as prospective Fed Chairman Summers called it quits before a two-day Fed meeting scheduled to start tomorrow. The markets took this as a positive, and the rally was on.

The Dow and S&P 500 gave back some of their early gains but managed to close solidly on the plus side while the Nasdaq slipped and ended slightly in the red. The reason for the early euphoric reaction was the fact that Summers might tighten financial conditions more than main rival Janet Yellen would, who now appears to be a shoe in.

The S&P 500 has now rallied nine sessions out of ten during this month and today we breached the magic 1,700 level to the upside again but were unable to hold it. We are now close to having recovered all losses sustained during the August sell off.

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ETFs/Mutual Funds On The Cutline – Updated Through 9/13/2013

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 310 (last week 297) 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. 63 ETFs (last week 59) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 784 (last week 769) above the line and 75 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: Are Emerging Markets Along With Europe Likely To Outperform Global Equities In The Future?

Ulli Market Review Contact

92835431Emerging markets and Europe is the place to be for investors. They should play this call through broad-based index ETFs in emerging markets, said Hank Smith, chief investment officer at Haverford Trust.

Emerging markets are the most underperforming area in what has been a bull run in equities globally and they will surely catch up, Hank observed. Asked if he thought Treasuries were overvalued as the majority (57 percent) of market participants surveyed believes Fed tapering has been already priced in and a yield of 3 percent would make 10-year Treasuries attractive, Hank chose to disagree.

Bonds are still an overvalued asset class and the markets are nowhere close to what one could consider a normalized environment. A 10-year yield of 1.7 percent is an emergency level, but a 10-year today at 3 percent is on the way to normal environment and not normal. Over the next 18-24 months, a 10-year yield that settles in at 4/4.5 percent is correct. Today’s buyer will be sadly disappointed in terms of a decline in the value of what they buy today, he noted.

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