Markets Smash Hopes About Stability

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Uncertainty about the timing of Federal Reserve rate hikes and persistent fears about a China slowdown continued to weigh on financial markets after last week’s wild ride. Investors thought stocks may have stabilized by the end of last week, however, indexes tumbled and oil prices surged Monday as Wall Street closed out a volatile August with hefty losses that gave the S&P 500 its worst monthly performance since May 2012.

The losses were broad-based with nine out of the ten S&P sectors falling. Energy stocks were the only gainers as oil prices surged for a third straight day after the OPEC indicated they are prepared to discuss production levels. As a side note, Crude has jumped 27% in three days.

As for real estate, the sudden collapse in the Shanghai Composite and the devaluation of the yuan in the past month have led some to worry that it could cause trouble for the U.S. real estate. The reality is that potential capital flows from the turmoil in China can find safety in U.S. properties and the data speaks to it. Over the last 12 months, nearly $5.1 billion of $21.1 billion in commercial real estate investments coming from China has been allocated to the U.S market.

There were no green numbers to be found in our 10 ETFs in the Spotlight with all of them heading south. Faring the best was the Mid-Cap Value ETF (IWS) with a loss of -0.44%, while Healthcare (XLV) gave back the most by surrendering -1.82%.

Our Trend Tracking Indexes (TTIs) remain in bear market territory.

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ETFs/Mutual Funds On The Cutline – Updated Through 08/28/2015

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 410 ETFs, of which currently 41 (last week 36) 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 97 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. 7 ETFs (last week 7) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 63 (last week 48) above the line and 757 below it out of the 820 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.

If you missed the original post about the Cutline approach, you can read it here.

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One Man’s Opinion: Is The Time Ripe To Bottom-Fish Or Re-Enter The Equity Markets?

ManThe latest rebound in US equities is probably too early to do a victory lap though there’s no denying that valuations have improved pretty dramatically in the last couple of weeks, said David Lafferty, Chief Market Strategist at Natixis Global Asset Management.

With the S&P 500 trading at about 18 times forward earnings and the Dow at about 16.5/17 times, the market is surely not dirt cheap. But global quantitative easing over the last three to four years has made everything pretty expensive and this sell-off has helped a lot in getting investors back into the markets, he noted.

Asked where investors should seek value now if valuations are not “dirt-cheap”, David said this may not be the best time to bottom-fish since he’s a little longer on outlook. Natixis’ view across sectors hasn’t changed much and there are two sectors where there could be good value.

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New ETFs On The Block: WisdomTree International Hedged Equity ETF (HDWM)

91551519The theme of hedging currency risk within the same wrapper of an international equity portfolio has gained popularity in the US, particularly after the greenback’s continued strength amid diverging monetary policies across the Atlantic.

WisdomTree, the fifth-largest US issuer of exchange traded funds, has been fairly successful in gauging investors’ preference as evidenced from their wildly successful WisdomTree Japan Hedged Equity Fund (DXJ) and WisdomTree Europe Hedged Equity Fund (HEDJ). Both the funds have managed to garner about $37 billion in total assets in the past 18 months amid the turmoil in Europe and Asia.

WisdomTree expanded their currency hedged wrapper recently with the launch of another product that has a diversified exposure to the world’s developed and developing countries ex-Canada and the US.

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ETF/No Load Fund Tracker Newsletter For August 28, 2015

ETF/No Load Fund Tracker StatSheet

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

http://www.theetfbully.com/2015/08/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-08272015/

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Market Commentary

CLOSING WITH A WHIMPER AFTER A TUMULTUOUS WEEK

Fri pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

One look at the chart tells the entire story. It was a wild and tumultuous week that ended up on the plus side but could have just as easily gone the other way with the S&P 500 touching the 1,867 level. As posted, both of our main directional indicators, the Trend Tracking Indexes (TTIs), slipped below their long-term trend lines and remain in bearish territory despite the enormous 2-day rebound we saw on Wednesday and Thursday.

For the time being, this rebound has the look and feel of what we saw last October, when the markets capitulated for only 8 days, before the bulls gained the upper hand and upward momentum resumed. It’s too early to tell if we will get lucky again or if this time will be different. Our goal, when using the Trend Tracking approach, is to sidestep an oncoming bear market in order to avoid severe portfolio destruction.

At times, as we’ve seen in October 2014, it will turn out to be a false alarm, and we will need to re-establish our equity positions once the trend turns bullish again. Nobody knows for sure what’s next, but I think we will find out pretty soon if this week’s sudden rebound was a resumption of the previous trend or nothing but a giant head fake.

6 of our 10 ETFs in the Spotlight edged up slightly during this see-saw day. Leading the winners was the Select Dividend ETF (DVY) with +0.38%, while, on the losing side, Healthcare (XLV) took the dubious honors with a loss of -0.57%.

Our Trend Tracking Indexes (TTIs) remain in bear market territory as section 3 below shows.

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Weekly StatSheet For The ETF/No Load Fund Tracker Newsletter – Updated Through 08/27/2015

ETF/Mutual Fund Data updated through Thursday, August 27, 2015

TOC 082715

If you are not familiar with some of the terminology used, please see the Glossary of Terms.

 

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: SELL — since 8/24/2015

TTI

Our main directional indicator, the Domestic Trend Tracking Index (TTI), broke through its long-term trend line generating a “Sell” for this arena effective 10/14/2014, which was followed by a violent break back above the line on 10/22/14 generating a new “Buy.” It was a classic whipsaw signal, and you can read more on my blog as to the events as they were unfolding.

As of today, our TTI (green line in above chart) is positioned below its long term trend line (red) by -1.46% after having generated a “Sell” signal as of 8/24/2015, which applies to all “broadly diversified domestic equity ETFs/Mutual Funds.”

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