Indexes Retreat As Senate Rejects Sequestration Plan; Europe Rises On Draghi, Bernanke

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

US indexes did an about face and retreated in the final minutes of trading erasing earlier gains after a Senate vote kept $85 billion of automatic spending cuts in place starting at midnight, and data on growth and employment gave out mixed signals about the economy’s health.

Gains in the US equity averages fizzled out after the Senate rejected a pair of bipartisan proposals to replace $85 billion in automatic spending cuts starting tomorrow.

GDP growth reading also weighed on investors after a Commerce Department report showed the US economy grew by a negligible 0.1 percent in the final quarter of 2012 on an annual basis, up from the initially estimated 0.1 percent drop. The revised reading, however, was well short of the 0.5 percent growth economists were expecting. For all of 2012, the US economy grew at a 2.2 percent rate.

On an upbeat note, weekly jobless claims however, fell sharply by 22,000 to 344,000 last week, suggesting companies were looking beyond spending cuts by the government and were maintaining staffing.

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Stocks Rise On Housing Data And Bernanke Talk; European Markets Climb As Earnings Top Estimates

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

US stocks surged Wednesday in a late rally, sending the Dow Industrials to a five-year high as investors welcomed more upbeat housing data and the Federal Reserve chief’s dovish testimony for the second day, reiterating his commitment to monetary stimulus to bolster growth. In other words, the spiked punchbowl will not be watered down as was previously feared.

Earlier, the National Association for Realtors reported contracts to buy existing homes jumped 4.5 percent in January, beating forecasts and setting a positive tone for the day’s trading.

Federal Reserve Chairman Ben Bernanke said the central bank has the necessary tools to scale back monetary stimulus and scotch a rise in inflation expectations in congressional testimony. Last week there have been apprehensions of the Fed scaling back its bond purchase program earlier than expected, but Bernanke effectively put to rest the speculations in the last couple of days.

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7 ETF Model Portfolios You Can Use – Updated through 2/26/2013

Ulli Model ETF Portfolios Contact

The major market indexes took it on the chin last week as a combination of punches thrown by the sequester discussions and unexpected results from the Italian elections were simply too much for the bulls to handle, and the bears had their day in the sun by knocking the S&P 500 down 2.22% since the previous ETF Model Portfolio report.

The markets recovered some yesterday on low volume indicating a possible dead cat bounce. Europe is back in the limelight as politicians watched in horror as Italian voters pounded the unelected technocrat Mario Monti in favor of unknown comedian/blogger Beppe Grillo.

While no clear majority was reached, and prolonged political instability/stalemate may be in the cards, the message was for the anti-establishment group and against EU sponsored austerity. The people have spoken, which is not what the EU central planners had in mind. I’m sure there will be more fallout to come as the so often announced “solved” Europe crisis has suddenly become “unsolved” again.

In the meantime, here’s the latest update for our Model ETF Portfolios:

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Equities Rebound On Economic Data, Fed Speak; Europe Slides On Italian Deadlock

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

US stocks advanced Tuesday, recouping more than half of Monday’s biggest decline in the benchmark indices since November as Bernanke defended the Fed’s policy amid solid housing and consumer confidence data. The jury is still out whether that was just a low volume dead cat bounce, or the beginning of something more.

Economic activity in the US has continued to expand at a moderate and uneven pace, Bernanke said in his testimony while defending the Fed’s unprecedented asset purchase program. There is little risk of inflation or asset-price bubbles, the central banker told lawmakers in the first-day of his semi-annual monetary policy report to Congress and cautioned automatic spending cuts, set to begin Friday, will impose a significant burden on economy if politicians are unable to reach a deal to avert the cuts.

In economic news, data released by the Commerce Department showed new-home sales jumped 15.6 percent last month to an annual rate of 437,000, the highest mark since July 2008.

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US Indexes Break Below Major Milestone Levels As Italy And Sequestration Hit

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

US stocks turned severely lower, with the Dow Industrials and the S&P 500 suffering their sharpest one-day decline of the year, giving benchmark indexes the biggest loss since November as political instability in Italy and looming spending cuts in the US hit investor sentiment.

Stocks erased early gains as partial election results suggested Italy may be left with a hung parliament as a strong performance by former Prime Minister Silvio Berlusconi may have given him a blocking minority to deny victory to the center-left coalition of Pier Luigi Bersani. Berlusconi’s coalition is seen as a threat to the nation’s austerity agenda while Bersani has campaigned to maintain the budget rigor of outgoing Prime Minister Mario Monti.

Stocks had pushed higher earlier on wagers Japanese Prime Minister Shinzo Abe will nominate a central bank chief who favors further monetary stimulus to haul the economy out of a 20-year long deflation.

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ETFs/Mutual Funds On The Cutline – Updated Through 2/22/2013

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 354 (last week 359) 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. 80 ETFs (last week 82) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 801 (last week 808) above the line and 58 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.