Stocks Defend Gains Ahead Of Fed’s Outlook

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

Another record day as the Dow and the S&P 500 closed at new all-time highs. Markets got a leg up due to stronger-than-expected earnings and guidance from Dow member Home Depot, and further amplified by comments from two Federal Reserve officials that suggested that the Central Bank hasn’t yet set a course to taper its bond-buying initiatives.

The Dow Jones Industrial Average rose 53 points (0.3%) to 15,388 to register its 19th consecutive Tuesday of gains, the S&P 500 Index gained 3 points (0.2%) to 1,669, and the Nasdaq Composite added 6 points (0.2%) to 3,502.

The major averages saw little change during morning action, but afternoon buying interest helped lift the indices to session highs. Most cyclical sectors (with the exception of materials and technology) finished among the leaders, but the defensively-geared health care sector settled atop the leader board as biotechnology outperformed. The iShares Nasdaq Biotechnology ETF advanced 1.0%, and prevented the Nasdaq from falling too far behind the other two indices as technology displayed relative weakness.

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Index ETFs Back Off Slightly On Lack Of News And Direction

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

The markets started the week lower, by and large there just wasn’t a lot of conviction on the part of either buyers or sellers. Amid a dormant economic calendar, stocks spent time on both sides of the flat line, but never put a whole lot of distance between themselves and that point for most of the day; only to limp to a soft close after ceding small gains.

The Dow Jones Industrial Average fell 19 points (0.1%) to 15,335, the S&P 500 Index declined 1 point (0.1%) to 1,666, after climbing four straight weeks, and the Nasdaq Composite lost 3 points (0.1%) to 3,496. Energy stocks were the day’s top gainers in the S&P 500 while consumer staples were the biggest underperformers. The S&P energy sector index rose 1.3 percent. In contrast, the S&P consumer staples index fell 1 percent.

The lack of conviction was owed in part to a lack of stirring catalysts. Presumably, some hesitation ahead of Fed Chairman Bernanke’s testimony before Congress on Wednesday about the economic outlook played a part in today’s mixed market. The consensus on the Street believes the Fed is more likely to begin tapering its bond purchases later this year…

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ETFs/Mutual Funds On The Cutline – Updated Through 5/17/2013

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 341 (last week 342) of them 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. 69 ETFs (last week 72) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 826 (last week 827) above the line and 33 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.

Last Week In Review: ETF News And Blog Posts To 5/19/2013

Ulli Market Review Contact

In case you missed it, here’s a summary of the ETF topics and market reviews I posted to my blog during the week ending on 5/19/2013.

It seems like I am saying the same thing every week as the major equity indexes are being propelled deeper into record territory. A short pause this week did nothing to reverse the major trend; it only offered an opportunity to deploy more money before the S&P 500 regained momentum by adding another 2%.

Again, my theme remains the same in that we are participating in this rally via low volatility ETFs, which surprisingly have outperformed the S&P YTD. For example, XLP, which we own, is up slightly over 20% vs. the S&P’s 17%.

Yes, that is YTD, as unbelievable as it may sound. Of course, there will be a correction at some point after this parabolic rally, which makes it an absolute must to have an exit strategy in place. If you don’t have one, you are not thinking clearly and are taking a huge risk.

Over past week, we covered the following:

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One Man’s Opinion: Can High Yield Bonds Give Decent Returns In A Low Interest Environment?

Ulli Market Commentary Contact

92835431It’s difficult to spot an upside in the high yields market since there has been an enormous rally in the segment with all time high dollar prices and all time low yields in the history of these industries.

Still, compared to other bond markets, the high-yield segment offers better returns, says Jeff Peskind, Chief Investment Officer and Founder of Phoenix Investment Advisers. In a low interest rate environment, it’s better to take credit risk with junk bonds than to take duration risk with higher rated bonds because if interest rates go up, junk bonds on credit is where investors really need to be, he observed.

Asked if there’s a little bit of frothiness in the corporate credit market as many companies are taking advantage of the low interest rate environment to refinance and issue new debt, Jeff said there’s little bit of fizz in the market because the structures in some of these companies are a little bit weaker than they were a few years ago. But the situation is different from 2007 since a lot of companies had a lot of leverage and very little liquidity then. The same companies are in a much better financial shape today because they are very liquid and they have a lot of time left to go before the big maturities. So it’s a weird world where the credit quality is good, the dollar price is high, the yield is low, but it’s still not a bad place to be in, he noted.

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New ETFs On The Block: Vanguard Emerging Markets Government Bond Index Fund (VWOB)

Ulli Bond ETFs Contact

137430914Vanguard, the Valley Forge, Pennsylvania-based third largest exchange traded funds issuer with nearly $286 billion in ETF assets, and one of the biggest asset management firms in the world, will roll out its much-awaited emerging markets bond ETF in early June, once the ‘subscription period’ of its mutual fund with the same strategy is complete.

The ETF shares of Vanguard Emerging Markets Government Bond Index Fund (VWOB) is in a so-called ‘subscription period’ from May 14 until May 30. During this period, the fund aims to accumulate enough assets to build a representative and diversified portfolio that will track the Barclays USD Emerging Markets Government RIC Capped Index. Until then, the portfolio will invest in money market funds.

The underlying benchmark comprises about 560 government, agency and local authority issuers and consists only of US dollar denominated emerging market bonds. The index will limit weightings of individual issuers when necessary to meet the IRS investment company diversification requirements.

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