Reaching The Melt-Up Zone

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[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

Even President-elect Trump’s early remarks that “I am going to bring down drug prices” couldn’t prevent the major indexes from storming into record territory with the exception being Healthcare-names as the Biotech ETF IBB got flattened by losing -2.94%.

It started in Europe where, despite the worsening Italian banking crisis, which is counting on a bailout, investors ignored all news, good or bad, and decided that equities were the place to be. All six major European indexes ended up in the green with the FTSE being the leader sporting a gain of +2.10% followed closely by the DAX with +1.96%.

A new intra-day high in the Transportation index, the first time in 2 years, confirmed the bullish tone as bonds, stocks, gold and the VIX all closed higher. The indexes inched up in the morning when all of a sudden “a buying algo got excited,” as ZH put it succinctly:

S&P futures and the SPY ETF suddenly exploded in volume and ramped higher. In those few seconds 2 million SPY shares went through (around $450 million) and 32,000 e-mini contracts (around $3.5 billion) screamend through the markets.

This certainly is not what you would consider a normal market based on fundamentals, it’s a manipulated market supported by nothing but hope and hot air, which will not end well. In the meantime, however, we will enjoy the ride but are prepared to jump ship should the need arise. After all, the following picture demonstrates the only world of reality:

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Upward Trend Continues

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[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

The upward trend continued in the face of potential adversity such as the Eurozone’s political uncertainty, in part caused by the outcome of the Italian referendum, which so far has been treated as a non-event despite serious monetary ramifications. The ECB is on deck this week and scheduled to announce further monetary policy decisions.

Domestically, all three major indexes were in “go” mode with the Nasdaq faring the best by adding +0.45% while Dow edged up only slightly but enough to notch another record closing high. Telecom and bank shares were the main contributors providing the fuel for the rally.

Still, the Fed is expected to raise rates next week, which could be a positive for the simple reason that the uncertainty and rhetoric about a rate hike will have finally come to an end leaving the only question unanswered as to the number of future rate hikes.

Hope on Wall Street continues that we have finally left the earnings recession and are back on track towards a period of earnings growth, which is sorely needed in order to justify the current lofty stock market valuations. If have my doubts whether this will be possible without first going through a healthy and long overdue market pullback.

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Italy’s Referendum Defeated, But Equities Rally

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[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

I had to laugh this morning after the Italian referendum was soundly defeated putting the Eurozone banking system in danger zone in regards to a much needed bailout of the Italian banks, but Europe stocks rallied sharply with the German Dax gaining 1.63%. As one trader remarked “Brexit took 3 days to recover its losses, Trump took 3 hours and Italeave took 3 minutes…”

Not to be outdone, the US markets followed suit, after a weak ending last week, and ratcheted higher with the S&P 500 adding 0.58%. Right now, we’re back to the moment in time where all news is good news, such as the view that the Fed is set to raise rates next week, which used to be a negative for stocks. However, a hike in rates is now seen as a positive due to it benefiting the banking sector. Go figure…

The quote of the day goes to Michael Block on why the market is rallying following the Italian referendum:

…[Apparently] the pattern of fading a potential crisis and then scrambling to cover and get long when everyone takes a breath and realizes that this time is not the apocalypse either still holds more than ever. I can’t justify any of this. The lesson investors and traders are getting is that everything is a buying opportunity and you need to not miss the boat. Brexit? Bullish. Trump winning the election? Bullish. Italy saying no to the referendum and the Prime Minister handing in his resignation? Bullish. Heck, all we need is a coup d’etat in India and the entire Belgian banking system to go kablooey and the S&P 500 will be at 3,000 by Christmas Eve.

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One Man’s Opinion: Ron Paul Tells Trump: “To Really ‘Make America Great Again’, End The Fed!”

OneMan'sOpinionBy ZeroHedge

Former Dallas Federal Reserve Bank President Richard Fisher recently gave a speech identifying the Federal Reserve’s easy money/low interest rate policies as a source of the public anger that propelled Donald Trump into the White House. Mr. Fisher is certainly correct that the Fed’s policies have “skewered” the middle class. However, the problem is not specific Fed policies, but the very system of fiat currency managed by a secretive central bank.

Federal Reserve-generated increases in money supply cause economic inequality. This is because, when the Fed acts to increase the money supply, well-to-do investors and other crony capitalists are the first recipients of the new money. These economic elites enjoy an increase in purchasing power before the Fed’s inflationary policies lead to mass price increases. This gives them a boost in their standard of living.

By the time the increased money supply trickles down to middle- and working-class Americans, the economy is already beset by inflation. So most average Americans see their standard of living decline as a result of Fed-engendered money supply increases.

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ETFs On The Cutline – Updated Through 12/2/2016

Below please find the latest High Volume ETFs Cutline report, which shows how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs are positioned.

This report covers the HV ETF Master List from Thursday’s StatSheet and includes 365 High Volume ETFs ETFs, defined as those with an average daily volume of more than $5 million, of which currently 191 (last week 200) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line from those that have dropped below it.

Take a look:

The HV ETF Master 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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ETF Tracker Newsletter For December 2, 2016

ETF Tracker StatSheet

http://www.theetfbully.com/2016/12/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-12012016/

Market Commentary

Trump Euphoria Fades

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[Chart courtesy of MarketWatch.com]

  1. Moving the Markets

On the surface, today’s payroll data was a resounding success with the US jobless rate falling to 9-year lows and employers adding some 178,000 jobs confirming that the 100% rate hike odds when the Fed meets later on this month may turn into reality.

Of course, as always, the devil about this “shining” jobs report is in the details as Americans no longer in the labor force soared to 95 million with a spike of 446,000 coming in November. The more troubling fact was that over the past three months did full-time jobs not only decline by 99,000, part-time jobs rose by an amazing 638,000 confirming that the quality of employment is not what it’s cracked up to be.

On the week, the markets suffered from a lack of enthusiasm as Trump euphoria waned and stocks bobbed and weaved, with ZH summing it up as follows:

  • Nasdaq’s worst week since Feb 2016
  • Small Caps worst week since Feb 2016
  • Bank stocks up 4 weeks in a row to highest since Jan 2008
  • FANG Stocks down 4 of the last 6 weeks
  • Treasuries down 4 weeks in a row, TLT lowest close in a year
  • USD Index down first time in 4 weeks
  • Oil’s best week since Feb 2011 (at highest since July 2015)
  • Gold down 4 weeks in a row to 10 month lows

 

This weekend, all eyes will be on Italy, which will cause some worry for the European markets as Sunday’s referendum has traders on edge. If the vote goes against the government, and there is a good chance of that, the PM will resign and will be replaced by an anti-euro party that could throw the Italian banks into crisis mode and the European markets into upheaval. Stay tuned!

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