Equity Indexes Rally On Fed Stimulus Decision; Are We Facing Another Bubble?

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

Extending their winning ways for the third straight session after the US Federal Reserve opted for a third round of quantitative easing to boost growth, the S&P 500 rallied to its highest level since 2007 Thursday.

The Dow Jones Industrial Average (DJIA) leapt 207 points, the highest since December 2007. Within the blue-chip index, breadth remained absolutely positive with all the 30 components closing the day higher.

The S&P 500 Index (SPX) jumped 23 points with financials leading the day’s gainers that included all the 10 business sectors. Today’s close also marked the index’s highest since December 2007.

Personally, I did not expect the Fed to put QE-Extreme on the table at this point. You could argue that it was an act of desperation as the jobs situation is not improving at all. With the major indexes hovering at 4 year highs it makes me wonder what ammunition, if any, the Fed has left in its arsenal should the markets head south and reach a point where a Fed assist is needed.

We have now catapulted further into bubble territory as economic fundamentals have been totally ignored, which means that these levels are supported by nothing more than hot hair. Is the Fed’s goal to reflate the stock market bubble?

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Markets Inch Higher On German Court Ruling, Fed Hope; Europe Marches Ahead And Nigel Farage Voices His Opinion

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US markets extended gains for the second straight day Wednesday, ending marginally higher after the German Constitutional Court ruling on the euro-area bailout fund, while investors remained cautiously optimistic on further monetary stimulus, as the Federal Reserve two-day policy meeting got underway in Washington.

Risk appetite improved after a German Constitutional Court ratified Europe’s Permanent bailout fund-The European Stability Mechanism (ESM), prompting investors to move away from safe havens.

Treasury notes retreated for the second day with the benchmark 10-year Treasury yield jumping five basis points to 1.76 percent while 30-year Treasury bond yield surged six basis points to 2.92 percent.

In Europe, bank stocks pushed ahead following Germany’s top court’s refusal to block the region’s emergency funding mechanism while defense firm BAE Systems Plc soared after it confirmed merger talks with Airbus parent EADS NV. The pan-European Stoxx Europe 600 index finished 0.1 percent higher for the day.

Contributing some reality about the Euro crisis was Nigel Farage with his always entertaining yet spot on observations in the following video:

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7 ETF Model Portfolios You Can Use – Updated through 9/11/2012

Ulli Model ETF Portfolios Contact

After ECB’s Mario Draghi’s “all out” announcement last Thursday, the markets ripped higher with the S&P 500 gaining some 2% since last week’s portfolio report.

I guess you could say he pulled out the big guns but, as has been the case all too often in the past, it’s only talk so far. As we’ve come to be accustomed to, the markets did not care, and they reacted with a rally on the mere intention, no matter how many hurdles remain to turn his proposal into a feasible and executable plan.

Two more market moving events are on the agenda, namely the German high court’s announcement as to the legality of the ESM today, which is followed tomorrow by the Fed’s announcement on the next QE 3 program, which is highly anticipated and already priced in the markets.

In the meantime, here’s the latest ETF model portfolio update:

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US Stocks Rebound Ahead Of FOMC Meet, German Court Decision; Europe Stocks Push Higher

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US stocks fought back Tuesday, rebounding from yesterday’s pullback as investors grew positive ahead of a German constitutional court ruling on the EU-wide bailout fund while speculations grew the US Fed will announce further stimulus after its two-day FOMC meeting starting tomorrow.

Treasuries retreated, pushing yields higher even though US auction for $32 billion of three-year notes drew record demand. Ratings agency Moody’s Investor Services had warned hours earlier it would cut US credit rating if the country failed to improve its debt-to-GDP ratio in next year’s budget negotiations.

European stocks rallied in late trade as risk appetite improved ahead of the US Fed’s two-day FOMC meeting starting tomorrow. The pan-European Stoxx Europe 600 index added 0.3 percent after trading in the negative territory for most of the day.

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Equity Indexes Fall As Concern Over Europe Overshadows Stimulus Bets; European Stocks Decline; German Court Ruling On Deck

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

Equity Indexes pulled back today after surging to multi-year highs Friday as risk sentiment weakened amid news reports that Greece has initiated talks with creditors after its ruling-coalition failed to reach an agreement over spending cuts.

Markets are jittery ahead of Wednesday’s German high court’s decision on the validity of the EUR 500 billion European Stability Mechanism (ESM) even as speculation over the prospect of another round of assets purchase by the Fed rose (expected Thursday) following weak employment data.

The Dow Jones Industrial Average (DJIA) lost 52 points while breadth within the blue-chip index turned negative with decliners eclipsing gainers 19-to-11. The S&P 500 Index (SPX) fell 9 points, or 0.6 percent, with telecommunications the sole gainer and tech hitting the ground hardest among its 10 business groups.

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ETFs/Mutual Funds On The Cutline – Updated Through 9/7/2012

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 350 (last week 317) 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. 74 ETFs (last week 64) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 825 (last week 781) above the line and 36 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.