[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Markets recovered from a steep drop early on during the trading day, but were unable to climb back up to break even by the closing bell as the chart above shows. The day’s losses were pretty broad, with nine of the 10 primary S&P 500 sector indexes ending in negative territory.

The buzz around most media outlets is that investors remain a bit concerned about numerous international conflicts, especially in Ukraine and the Middle East. Fighting continued between Israel and the Palestinian militant group Hamas as the death toll from the Israeli offensive in Gaza grew.

Chipotle (CMG) made headlines today with its Q2 earnings announcement. Shares of the Mexican restaurant chain surged more than 9% in after-hours trading on Monday, up $54.57 to $644.85, upon the news that its second quarter same-store sales jumped 17.3% for the second quarter of 2014 compared to the second quarter of 2013.

Despite the international conflicts, investors should remain focused on upcoming U.S. corporate earnings. Results from Apple (AAPL), Microsoft (MSFT) and Coca Cola (KO) are due out Tuesday and Caterpillar (CAT) on Thursday.

Our 10 ETFs in the Spotlight did not show much enthusiasm as the major indexes attempted to recoup early losses.

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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 364 (last week 375) 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. 84 ETFs (last week 87) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 751 (last week 761) above the line and 99 below it out of the 850 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.

The European Central Bank is likely to include in their Stress Test the money that commercial banks have raised and the fines they have incurred, said Erik Britton, director at Fathom Consulting.

The eurozone final inflation reading for June came in at 0.5 percent, matching an initial estimate. Asked if investors should take heart since price levels are not falling, Erik answered in negative. The issue in Europe is a highly indebted economy. The peripheral countries, including Italy, are particularly highly indebted.

The trouble with debt is that when inflation falls, it becomes a toxic mix. It turns out that, in Italy for example, an inflation rate of sub 1 percent is good enough for the economy to be on an unsustainable path. Italy’s inflation has been trending downwards for the last couple of years along with the rest of eurozone and that process is likely to continue as the economy is in a recessionary environment, he noted.

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BlackRock’s iShares, the world’s largest issuer of exchange traded funds, added two more funds to its tally recently to expand its lineup on investment themes that found favor with investors this year.

While the iShares Currency Hedged MSCI EMU ETF (HEZU) is a European equity-play that has a currency-hedge streak, the iShares Global REIT ETF (REET) is a global real-estate equity play with exposure in developed and emerging markets.

Following the Fed’s taper announcement last year, many currencies across the world witnessed heightened volatility on the back of heavy dollar outflow from international markets. The slide stoked demand for products that offered protection against currency fluctuations, bringing currency-hedged funds under the spotlight.

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ETF/No Load Fund Tracker StatSheet

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

http://www.theetfbully.com/2014/07/weekly-statsheet-for-the-etfno-load-fund-tracker-newsletter-updated-through-07172014/

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Market Commentary

Friday, July 18, 2014

MARKETS CLOSE OUT A TUMULTUOUS WEEK ABOVE WATER

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Markets were up and down this week, reacting to a range of factors. Solid earnings results from many large U.S. companies, as well as better-than-expected U.S. manufacturing readings and upbeat GDP suggesting the Chinese economy is stabilizing all helped support stocks.

Grabbing much of the attention, however, were geopolitical concerns – including news of the downed Malaysia Airlines passenger jet near the Russia-Ukraine border and the Israeli ground invasion into the Gaza Strip – which dragged markets lower mid-week, as the 5-day chart above shows.

In M&A news, we heard today that U.S. drug maker AbbVie Inc (ABBV) bought Dublin-based Shire Plc (SHPG) in a 32 billion pound ($54.7 billion) deal. The merged group will also have more firepower for acquisitions, particularly to bolster the rare disease business, the foundations of which were built on acquisitions by Shire.

In the week to come, international conflicts will certainly be watched closely for developments, while a minimum amount of economic data reports will direct the market’s attention to a busy week for corporate earnings announcements. Inflation data may grab some headlines on Tuesday with the release of the consumer price index for June.

Our 10 ETFs in the Spotlight went predominantly sideways with none of them making a new high for the day.

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ETF/Mutual Fund Data updated through Thursday, July 17, 2014

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

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY — since 10/25/2011

Our main directional indicator, the Domestic Trend Tracking Index (TTI), broke through its long-term trend line generating a Sell for this area effective 8/9/2011. Over the recent past, we’ve seen the TTI hovering slightly below and above this dividing line between bullish and bearish territory. The clear break to the upside occurred on 10/24/11 and, effective 10/25/11, a new Buy signal for domestic equities went into effect.

As of today, our TTI (green line in above chart) is positioned above its long term trend line (red) by +2.46%.

To avoid a potential whip-saw, a Sell signal to move out of all domestic equity positions will be generated once we have clearly pierced the red line to the downside. Be sure to tune in for the latest updates.

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