Market Indexes Inch Upward As Dow Hits Five-Year High; Europe Gains on Barclays

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

US equities edged up Tuesday sending benchmark indexes to five-year highs, as earnings topped street estimates and investors looked ahead to President Barack Obama’s State of the Union address in the evening.

In economic news, the US Treasury reported a budget surplus of $2.9 billion for January, beating estimates of a $2 billion deficit.

Overseas, finance ministers of G7 countries pledged to have market determined exchange rates and committed to focus fiscal and monetary policies on domestic issues, rather than targeting exchange rates.

Tuesday proved to be a busy day for US Fed officials. Voting member E. George, the sole “no” vote at the FOMC meeting last month, said the economy is put at risk when the central bank starts to sell the same securities it is buying.

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Indexes Drift Lower In Lackluster Trading; Novo Nordisk Puts A Drag On Europe

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

The major index ETFs finished marginally lower Monday on the lightest volume trading day of 2013 as investors took a breather after the recent rally and reassessed the markets that have pushed the S&P 500 and the Dow Jones near all-time highs.

With no significant economic and corporate-earnings news to chew on, markets took a pause Monday, recording the year’s lowest trading volume. Most Asian markets remained closed on account of Lunar New Year celebrations, eliminating one more possible bullish driver.

Finance ministers from the 17-member euro-area met in Brussels today to discuss aid to Cyprus and Greece as concern over the region’s debt crisis revived following political turmoil in Spain and Italy.

Separately, news reports suggested officials from Group of Seven nations were considering of issuing a statement aimed at averting a so-called currency war. Reuters reported a G-7 statement could be released ahead of the meeting of G-20 finance ministers and central bankers in Moscow this week.

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ETFs/Mutual Funds On The Cutline – Updated Through 2/8/2013

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 367 (last week 368) 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. 83 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 808 (last week 810) above the line and 51 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.

P.S.: Please note that the DD% columns for OIH, RTH and PPH have not been adjusted for recent splits.

Last Week In Review: ETF News And Blog Posts To 2/10/2013

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 2/10/2013.

Monday’s sell off in the markets proved to be short lived as upward momentum resumed and, while the indexes spent the rest of the week meandering sideways, the S&P managed to add 0.33% from last Friday’s close while the Dow had its first weekly negative close this year.

Any sort of correction would be a healthy thing given the run we’ve had since the November sell off. Otherwise, if this spike to the upside continues, the eventual awakening could be rude and financially painful.

Some bond ETFs have already come off their highs and broken their long term trend lines but have not triggered their trailing sell stop points. TLH, in which we have positions, has come close a few times.

Higher yields equate to higher interest rates and lower bond prices, but it’s too early to tell whether this reversal is temporary. If it’s not, and this low interest period is slowly coming to an end, there is a good chance that stocks will follow and head south as well.

Over past week, we covered the following:

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David Stockman: Housing Boom Is Not Sustainable; Another Bubble Waiting To Burst

Ulli Market Commentary Contact

101768508Many believe the robust housing data signals a long-term recovery in the struggling housing market and is a bright spot in the overall broader domestic economic recovery.

The euphoria is not without a basis as data supplied by the National Association of Realtors show existing home sales in December shot up 12.8 percent over the same period in 2011 while the total number of sales rose to a five-year high in 2012. The annual increase in existing home prices also surged to the highest level since 2005, with the median home price up 11.5 percent in December over the same period in 2011.

But not everybody is convinced the recent recovery is sustainable and believes it is another bubble in the making. David Stockman, former director of the Office of Management and Budget in the Reagan Administration is one of the skeptics.

David believes we are not witnessing a real, sustainable and organic recovery because in a world of medicated money by the central bank, things are not what they appear to be. There is some uptick in volume and prices are starting to come out from the sub-basement where it was down 30 percent. But it is happening in the most speculative former of sub-prime markets where massive amounts of fast money is rolling in to buy or rent on a speculative basis for a quick trade and as soon as they conclude that prices have moved enough to produce a return, they’ll be gone as fast as they came, he noted.

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New ETFs On The Block: Credit Suisse Gold Shares Covered Call ETN (GLDI)

Ulli Covered Call Strategy Contact

149427840Credit Suisse launched a new exchange-traded note (ETN) last month that offers investors exposure to price movement of gold in addition to monthly income distributions. The Credit Suisse Gold Shares Covered Call ETN (GLDI) is the first gold fund in the US that deploys a covered call strategy.

GLDI is linked to the Credit Suisse NASDAQ Gold FLOWS 103 Index, FLOWS stands for Formula Linked Over Write Strategy), a benchmark representing a hypothetical rolling covered call strategy (also known as buy-write strategy) on a notional long position in SPDR Gold Shares (GLD). The fund simultaneously sells out of money call options on the open positions on a monthly basis with a strike price that is approximately 103 percent of the price of GLD.

The advantage of this strategy is that GLDI generates periodic (monthly) cash income from the sale of options (in the form of premiums) that a direct long-only strategy would not, and helps offset losses when market price of gold is falling. However, in a rising market, profits generated by the long positions in the underlying asset (GLD in this case) can be limited if the sold call-options become ‘in the money,’ and the profits will be capped at three percent per month. This makes the product ideal for investors keen to preserve their capital from downside risks while seeking some regular income. Also gold-linked funds tend to offer effective hedge against inflation.

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