Index ETFs Still Affected By Cyprus; European Stocks Slump On Concern Cyprus To Reject Bank Tax

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

US equity averages ended mixed with the Dow Industrials eking out a slight gain, and the S&P 500 Index extending its longest slump of the year as Cyprus’ rejection of a bailout levy eclipsed economic data that showed growth in new home construction.

Stocks retreated as lawmakers rejected an unprecedented levy on bank deposits, throwing into doubt a EUR 10 billion bailout deal for the island nation reached with the European Union just three days ago. The government proposed a revised bill Tuesday that would exempt savings under EUR 20,000, but the nation’s parliament still rejected it. The deal had sought to raise EUR 5.8 billion by drawing funds from private bank deposits in return for EUR 10 billion in bailout money.

Index ETFs pared losses later in the session after the European Central Bank reaffirmed its commitment to provide liquidity to Cypriot banks within the existing rules.

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Cyprus Drags Down Wall Street; Europe Bruised By Cyprus Bank-Deposit Levy

Ulli Market Commentary Contact

Mon Pic

[Chart courtesy of MarketWatch.com]

US indexes fell for a second day, after the Dow Industrials reached record highs last week as a controversial bank tax levied by euro-area leaders on Cypriot bank deposits in return for a bailout reminded investors Europe’s debt problems are far from over.

Equities fell hard at the start as investors grew worried by news that euro area finance ministers forced bank depositors in Cyprus to share in the cost of rescuing the island nation, reducing the cost of bailout by EUR 5.8 billion to EUR 10 billion.

A parliamentary vote on the proposed levy due to take place today was postponed. Cypriot banks are closed until Thursday, a government official said. Under an unprecedented provisional agreement, the European Union has proposed a one-time tax of 6.75 percent on private bank deposits of less than EUR 100,000 and 9.9 percent for those over that amount. Markets are worried, and rightfully so, that such levies will could be used in larger economies, such as Spain and Italy in the future.

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ETFs/Mutual Funds On The Cutline – Updated Through 3/15/2013

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 353 (last week 354) 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. 79 ETFs (last week 79) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 815 (last week 817) above the line and 44 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 3/17/2013

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 3/17/2013.

It was a slow week with the S&P 500 “only” adding 0.6% to the prior five trading day’s sharp gains as the benchmark neared its 2007 all-time high. While the Dow has been frolicking in record territory for the past 10 days or so, the S&P has been lagging behind.

It seems that it’s only a matter of time until this milestone will be conquered as well since, as I posted before, the Fed, with its loose monetary policy, has become the decision maker and planner as to how much the equity indexes are allowed to move and in which direction.

Since economic fundamentals are disconnected from current market levels, I can see only two scenarios in the long run. Either the fundamentals improve, due the Fed’s desired and intended wealth effect, justifying the elevated market levels, or, the indexes reverse their trend and head sharply south to synchronize with the slowing economy.

There is way to anticipate when either one of these scenarios will occur, so it behooves you to not try to be a hero and make a wild guess, but to simply follow the trends and use my recommended exit strategy when necessary. To my way of thinking, only the market trends, as I measure them via my Trend Tracking Indexes (TTIs) can give you a true answer as to where market direction is while the fundamentals present a murky picture at best.

Over past week, we covered the following:

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One Man’s Opinion: Is New Cash Driving The Market Indexes Higher?

Ulli Market Commentary Contact

92835431It is assumed the “great rotation” causes money to flow from bonds to equities that drives the stock market higher. However, in the present context, many disagree saying it’s simply new cash that’s driving the markets higher.

Jeffrey Rosenberg, chief investment strategist for fixed income at BlackRock Inc, is one who agrees with that theory. If you look at the data, you’ll see that what happened last year when we had the fiscal cliff concern, people were afraid and we saw a growth in deposits and money market funds. First two months of the year, that money came out of bank deposits and money market funds and went into the stock markets. However, it’s not the great rotation yet, but the”other great rotation” where hard cash has flown into equities, noted Jeff.

Asked what yields are required to drive people to equities from bonds, Jeff said you need to see significant and protracted losses in the bond market to witness the “great rotation,” i.e. yields of above 3 percent for 10-year Treasury notes; current yields are nowhere near that now, he said, adding the US witnessed 30 years of declining interest rates and it will take more than one month to convince people to take their money out of their bond portfolios.Read More

New ETFs On The Block: Global X Superdividend US ETF (DIV)

Ulli Dividend ETFs, Low Volatility ETFs Contact

146026450Global X Funds, a New York-based provider of exchange-traded funds best known for its niche offerings, has launched the Global X SuperDividend US ETF (DIV). As the name suggests, the fund is a direct play on one prominent theme; the investors’ thirst for dividend and yield.

However, the new ETF features an additional source of appeal for the conservative investor; it plays on the soaring popularity of low volatility products. In short, it combines two highly popular styles – high dividends and low volatility.

Popularity of high income products have surged over the past couple of years as interest rates have hit rock-bottom, confining yield to fixed income instruments and savings products. Likewise, low volatility products have grown popular as investors sought protection from increasing market volatility caused by various factors including the European sovereign debt crisis, the global economic slowdown and the US political uncertainty over budget negotiations.

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