US Equities Slide Third Day In A Row On Budget Talk Concerns And Weak Retail Numbers

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

It was combination of weak retail numbers, showing that consumers spent less during this holiday season than last year, the ongoing fiscal cliff saga followed by low volume in the markets that provided neither upside ammunition nor any motivation for those left on Wall Street to get involved during the last few trading days of 2012.

It’s no surprise that many shoppers may have stayed away from the stores due to the uncertainty about the fiscal cliff negotiations, which also means that the market indexes will be at best holding on to these levels, but more likely sliding sharply should these issues not be resolved by December 31st.

Wall Street’s anxiety index, the VIX, rose and closed above 19 for the first time since early November, while the S&P 500 slipped a modest 7 points to cling on to the 1,420 level. Of course, hope remains for a ‘Santa Claus rally,’ which usually occurs during the last five trading days of the year and the first two of the New Year.

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7 ETF Model Portfolios You Can Use – Updated through 12/24/2012

Ulli Model ETF Portfolios Contact

It’s no surprise that the fiscal cliff negotiations were still the #1 driver of the stock market. With time running out, the S&P 500 meandered all of last week and gave back 3 points as hope remained that a last minute compromise might still be in the cards.

If that does not materialize, the indexes will have to adjust to that reality as that very hope for a fiscal cliff solution was responsible for most of the rebound after the sharp post election sell off.

The final year end fund/ETF distributions are being processed but have not been included in the model ETF portfolios, which therefore are currently ‘under reported.’

Here’s the latest update:

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Indexes Slip As Fiscal Cliff Reality Looms; Food For Thought On Who Is Guilty

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

Fears about the looming fiscal cliff are taking on a new dimension as there is exactly one week left for the President and Congress to come together and avoid the mandatory spending cuts and tax increases.

On extremely low trading volume, the equity indexes gave up ground for the second day in a row during today’s shortened session. Despite some occasional jawboning out of Washington, there simply seems to be no willingness on either side to come up with some reasonable solution  it all appears to be nothing more than a face saving effort.

For a spot on analysis,  including an identification of the guilty party, Mark Grant, author of Out of the Box, has some food for thought in “The Sleeper Must Awaken:”

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ETFs/Mutual Funds On The Cutline – Updated Through 12/21/2012

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 349 (last week 341) 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. 82 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 700 (last week 673) above the line and 159 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 12/23/2012

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 12/23/2012.

Anxiety about the fiscal cliff outcome was overridden by continued hope that a compromise would be in the cards which lifted the S&P 500 by about 1%.

Friday’s sell off brought back the sobering reality that ‘compromise’ is a dirty word as nothing was accomplished on Thursday night with the result that the markets headed south but not as severely as it originally appeared. I happened to be watching the futures and saw a flash crash take the Dow briefly down by 350 points while the S&P 500 dropped about 40 points.

By Friday morning things had calmed down a bit and helping the indexes later on were well timed news reports that the warring parties were still engaged in conversations. So, hope is still on the agenda, and the drama will continue for the remainder of this year.

Over past week, we covered the following:

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One Man’s Opinion: Can We Live On Stimulus Forever?

Ulli Market Commentary Contact

The Federal Reserve is clearly in this difficult situation where it needs to express its message more forcefully, because it’s not about how much quantitative easing it does, but the message behind it, says Kenneth Rogoff, an economics professor at Harvard.

So, he certainly welcomes their change towards focusing on final outputs like employment and inflation, though he would have liked to see a little bit looser inflation target because the Fed needs to have inflation targets up to drive investments, he noted.

But the latest development (of explicitly tying unemployment rate to inflation rate) is certainly a welcome change and the evolution process is likely to continue, he added.

Asked if the economy needs any stimulus, either from the Fed or the Congress, Ken said the economy can’t survive on stimulus forever. But withdrawing it too rapidly in a fragile economy makes no sense, and the right plan would be to gradually tighten the monetary policy over a long period, he noted. But the real problem is that the system is so paralyzed that it isn’t being able to be creative.

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