Treasury Yields Fall To Erase Fed-Fueled Jump; US Equities Stuck On Growth Worries

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US equities mostly closed lower even as blue-chip stocks managed to cling onto modest gains after economic reports from the US, China, Japan and Europe increased concern the global economic recovery is worsening.

Chinese manufacturing slowed down for the 11th straight month in September after a HSBC preliminary purchasing manager’s index reading ticked up slightly to 47.8 from 47.6 in August, while a separate report showed services and manufacturing in Europe slumped to a 39 month low in September.

In the US, first-time jobless claims dropped by 3,000 to 382,000 last week, staying above 375,000 estimated by economists at MarketWatch. A Philadelphia Federal Reserve Bank report showed manufacturing in the region improved slightly with its business-conditions index rising to negative 1.9 from negative 7.1 in August.

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US Stocks Inch Higher On Housing; Europe Gains On Japanese Stimulus

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US stocks snapped a two-day mini-decline to finish slightly higher Wednesday after existing US home sales came in better than estimated while Japan announced additional monetary stimulus to boost a stagnating economy.

The indexes turned lower early on following a Commerce Department report that showed housing starts in August grew at 2.3 percent to an adjusted annual rate of 750,000, weaker than the expected 775,000 pace. Number of building permits was also weaker than estimated even though they showed robust growth over the same period last year.

Losses reversed later after a report from National Association of Realtors showed existing home sales for August rose 7.8 percent to an annual rate of 4.82 million on seasonally adjusted basis, bettering 4.6 million projected by Bloomberg.

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7 ETF Model Portfolios You Can Use – Updated through 9/18/2012

Ulli Model ETF Portfolios Contact

Following the Draghi announcement 2 weeks ago, the Fed stepped up to the plate by going “all in” with its QEternity plan of buying some $45 billion in mortgage backed securities per month.

The program is open ended meaning there is nothing else for the Fed to announce in terms of more stimulus until this plan has run its course. Of course, we all know how it’s being paid for as the well known Control+P command will be executed to perfection. I can’t see how in the long term equities can continue to rise, now that hope of more stimulus is gone and the worldwide economic slowdown is well under way.

On the other hand, there is no sense in guessing as you can never be sure what may affect markets in one direction or the other. Our trailing sell stops will serve as our guide to indentify any potential turning points.

As a result of Fed policy, long-term currency debasement is virtually assured, which is why I have added gold, commodities and energy back into some of our model ETF portfolios. In essence, I replaced those positions that we got stopped out of earlier this year.

Take a look at the latest update:

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Market Indexes Dip On Europe Worries; Banks, Oil Firms Drag Europe Lower

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

Despite the housing market showing signs of improvement in September, US stocks closed mostly lower for the second straight day Tuesday on uncertainties in Europe as Spain continues to drag its feet over seeking a formal bailout from the European Central Bank despite Spanish 10-year borrowing costs edging higher in recent auctions.

My view of why Spain is so hesitant to apply for an official bailout is simply the fact that what may come to light in respect to the true state of their financial affairs may be if not downright shocking but at least very surprising. Of course, complying with the conditions of such a bailout may very well be a career ending move for some of the top echelon of the politicians involved.

As a result of that uncertainty, Treasury yields dropped for the second day as prices edged up, recouping about half the losses suffered since the Fed Chairman Bernanke announced plans to buy more mortgage-backed securities last week. Demand for safe haven assets surged despite the US housing sector improving in September as Europe weighed on investors.

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Equity ETFs Step Back As Manufacturing Disappoints; Europe Hits Gridlock

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

Equity ETFs took a breather to close lower Monday as last week’s Fed stimulus-driven euphoria faded after a disappointing New York area manufacturing data forced investors to mull over the health of the economy. Maybe some of the realization is sinking in that all is not well as markets have chosen to ignore economic fundamentals by focusing too much on the Fed’s spiked punchbowl.

After a four-day winning streak, the Dow Jones Industrial Average (DJIA) fell 40 points and the S&P 500 Index (SPX) slipped 5 points with natural resources and financials declining the most and telecommunication and healthcare outperforming among its 10 business groups.

US Treasuries started the week on a winning note after a four-day losing streak as a New York area factory-output gauge slumped to -10.41 this month from -5.85 in August, increasing investor appetite for safe-havens. The gauge, known as the Empire State Index, is at its lowest since April 2009, underscoring Bernanke’s concern that more monetary stimulus may be required to halt the slowdown.

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ETFs/Mutual Funds On The Cutline – Updated Through 9/14/2012

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 375 (last week 350) 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. 86 ETFs (last week 74) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 838 (last week 825) above the line and 24 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.