Heading South As Budget Logjam Saps Confidence; Europe Tracks Lower

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US equities fell today as the public standoff between the Republicans and Democrats in reaching a deal to avert recession-inducing tax hikes and spending cuts in the New Year overshadowed a drop in jobless rates and growth in retail sales.

Ohio Republican John Boehner criticized the Democrats for looking to punish small businesses through tax hikes while addressing a news conference on what is stalling negotiations to avoid the so-called fiscal cliff and blasted President Obama for not being “serious” about spending cuts.

Nevada Democrat and Senate Majority Leader Harry Reid retorted that Americans should not be held hostage to Boehner and his press events in a separate news conference. White House spokesman Jim Carney also entered the fray stating Republican opposition to higher taxes on the wealthiest two percent is holding up a deal. And so it goes tit-for-tat…

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Index ETFs Erase Gains As Optimism Over Bernanke Talk Fades; Europe Holds Ground

Ulli Market Commentary Contact

The major index ETFs erased gains today as optimism over Federal Reserve plans to expand its balance sheet faded after Chairman Ben Bernanke warned the central bank doesn’t have the tools to shield the economy from the looming fiscal cliff.

Stocks rallied to session highs after the central bank said it would add $45 billion a month of Treasury securities starting January to its $40 billion a month purchases of mortgage-backed securities, and would keep the Federal Funds rate to near zero so long as the unemployment rate remains above 6.5 percent and inflation rate is not forecast to rise above 2.5 percent.

In its growth forecasts, the Fed said unemployment rate will fall between 7.4 percent and 7.7 percent by the end of 2013. GDP growth outlook for 2013 was lowered between 2.3 percent and 3 percent from its September forecast of at least 2.5 percent growth.

The rally faded after Bernanke said monetary stimulus can not offset the full impact of tax hikes and spending cuts set to go into effect in January should politicians fail to reach a budget deal.

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7 ETF Model Portfolios You Can Use – Updated through 12/11/2012

Ulli Model ETF Portfolios Contact

Despite a lack of progress in the Fiscal Cliff negotiations, the major indexes managed to climb a wall of worry with the S&P 500 gaining some 1.5% since last week’s report.

Volume being the lowest of the year, as many retail investors have fled equities in droves, may very well be the main contributor as High Frequency Trading encounters no directional resistance. To be fair, hope still exists that Washington’s finest will come up with a solution.

However, time is running short as some news media have pegged the deadline for a resolution to be next Tuesday prior to recess.

As is to be expected, those model portfolios with exposure to bonds have been lagging the S&P 500 index, while the others (#5 and #7) have kept pace. However, I think it’s more prudent to be diversified as the markets maybe setting themselves up for a sharp pullback.

It is during those times when equities get clobbered that your bond holdings will hold up far better. That’s why you need to have a broad view and measure the value of a portfolio composition after you have gone through an entire bullish and bearish cycle and not get stuck on a short term equity run.

Here’s the latest update of our ETF Model Portfolios:

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US Stocks Crawl Higher On Budget Hopes, Fed Stimulus; Europe Rises On German Confidence

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US stocks finished higher with the Dow Industrials erasing losses since the Election Day and the S&P 500 rising for the fifth straight day as optimism grew that the Federal Reserve will announce more stimulus when wrapping up its final meeting of the year tomorrow and awaited progress on federal budget negotiations in Washington hopefully comes to pass.

Equity averages trimmed early gains after Senate Majority Leader Harry Reid said the Republicans have offered no details on what they want from the negotiations. However, House Speaker John Boehner said he was hopeful of an accord while addressing the House of Representatives Tuesday.

The two-day long Federal Reserve Open Market Committee meeting began in Washington today that will end in updated projections on unemployment, inflation and economic growth. Investors expect the Fed to supplement the $40 billion a month mortgage-purchases with another round of Treasury purchases when their bond swapping program, known as Operation Twist, expires at the end of the month.

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Indexes Rise On Budget Hopes, China; Europe Tracks Higher; Stunning Video Demonstrates US Debt

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

The major market indexes finished modestly higher with the S&P 500 index extending tiny gains into the fourth straight session, it’s longest since August after economic data in China beat estimates, overshadowing political uncertainties in Europe and the continued stalemate over budget negotiations in Washington.

Europe was back in the spotlight after Italian Prime Minister Mario Monti unexpectedly announced plans to step down after the parliament passes a national budget later this month.

In Asia, Chinese stocks rallied with the Shanghai Composite Index jumping to a four week high after retail sales and factory output data beat economists’ estimates while revised data indicated Japan has slipped into recession.

In the US, the President and the House Speaker John Boehner met one-on-one at the White House to discus how to avert the billions in spending cuts and tax hikes set to start next year.

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ETFs/Mutual Funds On The Cutline – Updated Through 12/7/2012

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 342 (last week 332) 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. 78 ETFs (last week 73) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 723 (last week 701) above the line and 136 below it out of the 861 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.