Markets Stagnate As Fed Ends Bond Buying Program

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Markets took a quick but short dive after the Fed’s announcement that its monthly bond buying program had come to an end. The major indexes recovered into the close but ended up on the south side of the unchanged line.

The end of this quantitative easing program came as expected with the Fed expressing confidence in the “economy’s prospects.” With this driver of the markets being gone, at least for the time being, we have reached the point where the rubber meets the road. In other words, can the economy stay on its own two feet with enough momentum to keep the market indexes at these elevated levels?

My guess is that we’ll find out pretty soon once the earnings season has died down. The question in my mind is whether the Fed will have the nerve to not step in with another emergency QE program should the markets retreat by some 10% or more.

In the meantime, we will hold on to our invested positions subject to our trailing sell stops and/or trend line breaks of the TTIs.

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Major Indexes Up Above 1% On Solid Earnings Reports

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Equities rocketed upwards today after investors were encouraged by multiple solid earnings reports as well as a rise in consumer confidence. The Dow gained 1.12% and closed about 17,000 for the first time since October 3rd. The S&P 500 rose 1.19% and the Nasdaq led the pack gaining 1.74%.

Tech stocks in the Nasdaq got a boost today from the surge in Alibaba (BABA) shares, which pushed past $100 a share for the first time. Apple (AAPL) also gained upon rumors that Alibaba might be working with Apple and its Apple Pay initiative. On the flip side, both Twitter (TWTR) and Facebook (FB) shares took a dive today after releasing less than attractive earnings reports and revenue projections.

In the economy, it was reported today that consumer confidence rose sharply in October, reaching its highest level in seven years despite the volatile stock market and global economic weakness. Outlook rose to 94.5 from 89 in September.

Finally, The Federal Reserve opened a two-day meeting today amid volatile markets and a slowing global economy, but economists say it’s likely to send a stay-the-course message that foresees an increase in near-zero interest rates by mid-2015. The news that got downplayed was that QE officially ended today; so, will the stock market be able to stand on its own legs? I would not hold my breath, but we will find out in due time.

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Stocks End Mixed After Record Week

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks took somewhat of a “breather” on Monday, closing mixed just after coming off the best weekly performance of the year. The biggest drag on the markets was that oil prices fell to $80 a barrel, which marks a notable decline from the $107 price in June. Sinking oil prices suggests weakening global growth and signals that supply is outstripping demand. Oil prices are at their lowest levels since June 2012 and more than 20% below their 2014 highs. The S&P 500 dipped 0.13%, but the Dow rose 0.1% and the Nasdaq also added 0.1%.

In earnings news, this earnings season has seen more than 7 out of 10 companies, or 71.4%, in the S&P 500 top third-quarter earnings forecasts, better than the long-term average of 63%. So far, earnings growth is on track for a gain of 7.7%. This week was poised for a batch of earnings announcements from nearly 160 companies. Later this week will bring reports from Caesars (CZR), Electronic Arts (EA), Pfizer (PFE) Starbucks (SBUX) and Facebook (FB).

And in economic news, The Federal Reserve is expected to close a chapter in history this week and announce the conclusion of its massive stimulus program. Let’s stay tuned for this announcement and see if there are any immediate effects on market direction.

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ETFs/Mutual Funds On The Cutline – Updated Through 10/24/2014

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 210 (last week 105) 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. 35 ETFs (last week 16) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 498 (last week 111) above the line and 352 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.

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One Man’s Opinion: Will Capital Expenditures Rise In Sectors That Can Take Advantage Of Cheap US Energy Prices?

92835431The US economy is held back by slow growth in exports amid other struggling major economies, said Russ Koesterich, chief investment strategist at BlackRock Inc.  For much of the last 20 years, the US consumers have been the engine of growth, even when global economies didn’t do particularly well.

The US consumer is doing okay, but the economy is still in an environment of slow-age growth and fairly high debt levels, which is constraining consumption, as evidenced in every consumer spending report, he said.

Asked if something different could come out of the current crisis, i.e. a “new globalization,” Russ said ideally the global economy is likely to witness a rebalancing, which involves more consumption in key emerging markets like China and arguably involves more investment in several developed markets, particularly in the US and Europe.

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New ETFs On The Block: iShares Currency Hedged MSCI Emerging Markets ETF (HEEM)

137430914San Francisco-based iShares, the biggest issuer of exchange-traded funds, recently expanded its offerings in the emerging-market niche with the launch of the iSharesCurrency Hedged MSCI Emerging Markets ETF (HEEM).

The new fund is the currency-hedged edition of BlackRock’s popular emerging-market focused iShares MSCI Emerging Markets ETF (EEM) and should find favor with investors who wish to protect their earnings from a surging dollar.

The passively-managed fund tracks the MSCI Emerging Markets 100 percent USD Hedged Index and consists of large- and mid-cap common stocks from companies across more than 20 EM countries including South Korea, Taiwan, Russia, India, China, Brazil, Czech Republic, Hungary, Greece, Colombia, Peru, Poland, Qatar, Chile, Malaysia, South Africa, Mexico, the Philippines, Turkey etc.

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