Major Market Indexes Lose Face-Off with Gravity; Europe Dives

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

I did not think it was possible that the markets were actually able to lose a face-off with gravity after their relentless and almost uninterrupted ascent since mid-November. Even the by now well documented afternoon “lift-a-thon” was notably absent, as the major market indexes took their cue from Europe and produced their worst loss of this year.

Certainly, a correction was long overdue since this current trend is simply unsustainable; however, the trigger point causing this uncertainty was Europe, or more specifically rising Italian and Spanish bond yields caused by the corruption scandal in Spain along with hidden Italian bank losses and cover ups.

Well, I for one am glad to hear that Europe is fixed as the main stream media have been jaw boning about for the past few weeks. Now, all of a sudden, the sovereign debt crisis has gained momentum again as investors realized that nothing has been resolved; issues have been merely postponed.

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ETFs/Mutual Funds On The Cutline – Updated Through 2/1/2013

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 368 (last week 371) 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. 85 ETFs (last week 85) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 810 (last week 804) above the line and 49 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 2/3/2013

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 2/3/2013.

After the S&P 500 broke its 1,500 milestone level last week, it was now the Dow’s turn, which conquered its own respective 14,000 marker on Friday. With 1,500 now clearly in the rear view mirror, I am running out of superlatives to describe this equity march into the stratosphere.

Sure, as I have repeatedly posted, whenever you create a reckless amount of money, such as the Fed’s $85 billion per month, a good part of it will look for a new home and equities are the place of choice despite poor earnings, a weak GDP and other numbers that in no way support these lofty levels.

Since we don’t control any of these issues, we will simply follow the trends as long as they last and exit our positions whenever our trailing sell stops give us the sign to do so. That eliminates any kind of guesswork or emotional decision making.

Over past week, we covered the following:

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One Man’s Opinion: Do Bond Markets Pose The Biggest Risk?

Ulli Market Commentary Contact

92835431“If there is something untoward coming at us that people haven’t anticipated, it’s probably going to come from the fixed-income side,” says Michael Aronstein, president of Marketfield Asset Management. That’s where the participation is, that’s where the expectation is the highest and the fear of something disruptive is the lowest, he added.

Asked why something disruptive hasn’t happened yet in the fixed-income market, Michael said it is beginning to happen. We had a pretty substantial backup in all high grade bonds since the Fed embarked on its latest program (of buying mortgage bonds). The 10-year US Treasury notes bottomed out at 1.40 percent last year and the yield is at two percent now. Treasury yields are unlikely to come down again and the 31-year long bull-run in the bond markets exhausted in last summer.

Asked how should investors play in the bond markets, Michael said he would be very careful in holding fixed-income products and examine how much duration risk it has in high-grade bonds. It’s interesting to note that we have essentially the same structure in housing finance now (that we had before the crisis), he observed.

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New ETFs On The Block: Wisdomtree Global Corporate Bond Fund (GLCB)

Ulli Bond ETFs Contact

56371366WisdomTree Investments, the New York-based ETF sponsor with over $20 billion in assets under management and known for its fundamentals-focused funds, has rolled out an actively managed global corporate bond ETF to be sub-advised by Western Asset Management Company (Western Asset).

The WisdomTree Global Corporate bond Fund (GLCB) is one of the first funds that blend a diverse portfolio of both developed and emerging market corporate debt with an aim to maximize total return through coupon income and capital appreciation.

GLCB invests in both dollar and non-dollar denominated investment grade and high-yield securities issued by private, public and state-owned or sponsored corporations from around the world, including the US. The fund will invest at least 80 percent of net assets, plus the amount of any borrowings for investment purposes, in corporate debt. Corporate debt includes fixed income securities such as bonds, notes, money market instruments and loan participation notes.

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02-01-2013

Ulli Newsletter Archives Contact

ETF/No Load Fund Tracker Newsletter For Friday, February 1, 2013

ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2013/01/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-01312013/

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Market Commentary

Friday, February 1, 2013

DOW TOPS 14,000 ON JOBS DATA; EUROPE RISES AS US RECOVERY ALLEGEDLY GAINS TRACTION

US stocks rallied Friday with the Dow Industrials closing above 14,000 for the first time since 2007 after upbeat reports on the labor market and manufacturing boosted investor confidence in the world’s largest economy.

Markets surged after a Labor Department report showed the economy added 157,000 jobs in January following a revised 196,000 gain in the previous month and a 247,000 spike in November. The revisions revealed the economy added 335,000 more jobs than originally reported. Though the January reading fell short of the 180,000 rise projected by economists, investors were encouraged by the fairly healthy 181,000 per month addition in 2012. Unemployment rate, however, ticked higher to 7.9 percent in January from 7.8 percent in the previous month.

Separately, the Institute for Supply Management’s manufacturing index rose to a nine-month high of 53.1 in January, topping estimates of 50.5, in a sign that manufacturing is on the path to recovery.

The University of Michigan/Thomson Reuters monthly index of consumer confidence rose to 73.8 in January from 72.9 in the previous month. Economists were expecting a reading of 71.4.

A Commerce Department report showed construction spending rose 0.9 percent in December, coming in well above expectations.

The Dow Jones Industrial Average (DJIA) zoomed 149 points to 14,010, up 0.8 percent over last Friday and capping its fifth straight week of gains. The S&P 500 Index (SPX) rose 15 points to 1,513, with all the 10 business groups within the benchmark index advancing for the day. Telecommunications led today’s gains while the index added 0.7 percent for the week.

Treasuries slipped Friday, pushing yields to nine-month highs after a Labor Department report showed the US economy added more jobs than previously estimated, adding to signs the economic recovery is gaining traction.

Most European stocks posted solid gains on Friday though equity averages slumped to their biggest weekly decline this year after a report earlier in the week showed the US economy shrank unexpectedly in the fourth quarter and Spain’s regulator’s lifted a ban on shorting equities.

Data from the eurozone showed unemployment rate remained unchanged at 11.7 percent in December while it was revised down to 11.7 percent from 11.8 percent for November.

Separately, a report showed manufacturing in the currency union contracted at its slowest pace in 11 months in January. Markit’s final PMI reading rose to 47.9 from 46.1 in December. Reading below 50 indicates contraction.

Trend wise, our Trend Tracking Indexes (TTIs) followed the markets and ended the week as follows:

Domestic TTI: +3.10% (last week +3.21%)

International TTI: +11.94% (last week +11.52%)

Again, with the Fed having both hands on the print button to generate some $85 billion of new money every month, some of it is bound to find its way into the stock market. How long this can go on considering the total disconnect from fundamentals is anyone’s guess, but it behooves to be prepared to exit should this rampage come to an end all of a sudden.

Have a great week.

Ulli…

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READER Q & A FOR THE WEEK

All Reader Q & A’s are listed at our web site!
Check it out at:

http://www.successful-investment.com/q&a.php

A note from reader Don:

Q: Ulli: Considering the Fed’s current monetary policy, when would be the appropriate time to consider investing in a Bear ETF like TBF ProShares Short 20+ Year Treasury?

A: Don: A good time would be once TBF breaks above its long-term trend line to the upside, which it recently did. If you are an aggressive investor, you can look for some limited exposure, but use a trailing sell stop.

The Fed’s policies call for continued lower interest rates, and TBFs move could be just a dead cat bounce. That would also be true in case equities take a dive, which they will but the timing of it is totally up in the air.

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WOULD YOU LIKE TO HAVE YOUR INVESTMENTS PROFESSIONALLY MANAGED?

Do you have the time to follow our investment plans yourself? If you are a busy professional who would like to have his portfolio managed using our methodology, please contact me directly or get more details at:

https://theetfbully.com/personal-investment-management/

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Back issues of the ETF/No Load Fund Tracker are available on the web at:

https://theetfbully.com/newsletter-archives/