All Smiles As Markets Close On Wednesday

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Today’s trading closed with smiles on most everyone’s face in Wall Street as the Dow and S&P 500 had one of their best point gains of the year. The Dow gained 1.69%, the S&P 500 rose a whopping 2.04% and the Nasdaq rose ahead of the pack gaining 2.11%!

Markets were driven higher today by news of oil prices and the Russian ruble stabilizing, but primarily by news that the Federal Reserve is on course to raise rates for the first time since 2006 — but likely won’t hike short-term rates any earlier than the middle of next year. Needless to say, investors liked what they heard.

Policymakers released forecasts today which show they now expect the Fed’s benchmark short-term rate to rise a bit more slowly than they predicted in September. The rate is now expected to be about 1.1% at the end of 2015 and about 2.4% at the end of 2016, below their earlier estimates of 1.3% and 2.8%.

In tech news, Oracle’s (ORCL) stock got a pop today after delivering its quarterly earnings and revenue numbers that topped analyst expectations. Investors are excited because the company has turned around from a three-quarter losing streak, mostly due to its inability to catch up with other competitors in the cloud and software space.

With the broad advance, it’s no surprise that all of our 10 ETFs in the Spotlight rallied; however, no new highs were made as this rebound merely improved the standing in the “Off High” column shown in section 3.

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Stocks And Russian Ruble Continue Struggling

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks were up and down substantially throughout the day, but ultimately closed lower across the board, marking losses for the six of the past seven days. The Dow dropped 0.7%, the S&P 500 fell 0.8% and the Nasdaq ended 1.2% lower. West Texas Intermediate crude oil dropped to $53.60 a barrel early in the day, but trimmed losses by closing up 2 cents to $55.93 a barrel.

As equities continue to sell off, spooked by sliding oil prices, investors have moved to the perceived safe havens of U.S. government bonds. As a result, the yield on the 10-year Treasury fell to 2.05% from a close of 2.12% Monday. It is odd, given the fact that falling oil prices are actually a good thing for U.S. and global consumers, manufacturers and airlines.

Apparently, there has been a lot focus on the tumbling Russian ruble over the past two days. At its lowest today, the currency was down 23.2% vs the USD which marked an all-time record low. The turmoil has largely been due to the fact that Russia’s central bank suddenly sharply raised interest rates.

Given today’s roller coaster ride, it’s no surprise that 9 out of our 10 ETFs in the Spotlight closed lower. No sell stops were triggered as you can see in section 3 below.

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Markets Slip On Oil; Petco To Be Bought For $8.7MM

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Markets continued to slide further downward today, driven lower in particular by the drop in oil prices and energy stocks. U.S. crude fell 3.3% to settle at $55.91, hitting fresh 5-1/2 year lows. Both U.S. crude and Brent have fallen nearly 50 percent from highs in June. Today, all major indexes retreated as the chart shows.

While oil and energy numbers were a drag, there is much to be optimistic about regarding other economic data. Among the day’s economic numbers, U.S. manufacturing output recorded its largest increase in nine months in November as production expanded across the board, pointing to underlying strength in the economy.

There is still a bit of earnings news left for us this week, particularly with food companies. We will hear from Darden (DRI), owner of Olive Garden and LongHorn Steakhouse amongst others. Investors have been anxiously standing by to see who the new CEO will be, as well as the anticipated 80% growth in profit for Q3. We’ll also hear from ConAgra (CAG) and General Mills Inc. (GIS). General Mills is still hoping kids love a bowl of cereal in the morning; however, their sales have been stale as sour milk recently. Wall Street analysts are anticipating an 8% decline for the quarter.

And in M&A news, shares of pet supply retailer PetSmart (PETM) rose 4.2% after it agreed to be bought by a private equity consortium led by BC Partners Ltd for $8.7 billion, in the largest leveraged buyout of the year. Woof woof!

In a repeat from Friday’s downturn, our International TTI confirmed its trend reversal and is now in “Sell” mode. On a personal note, there has been no effect on our holdings, since we had no exposure; you may recall that I have from time to time posted my aversion towards international equities, especially Europe.

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ETFs/Mutual Funds On The Cutline – Updated Through 12/12/2014

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 222 (last week 264) 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. 32 ETFs (last week 41) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 440 (last week 659) above the line and 406 below it out of the 846 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: Has The ECB’s Stimulus Program Failed To Drive The Eurozone’s Real Economy?

92835431The looming elections in Greece have triggered higher volatility across asset classes as they remind of the so-called “Grexit” (Greece exit from the EU) episode that played out in 2010-11.

The first round of Presidential election will be held next week in Greece and if the government/ruling party fails to secure 2/3rd majority, the crucial third round will be held 29th December 2014 where the govt. must secure at least 60 percent or 180 votes out of 300 parliamentarians, said Christian Schulz, senior economist at Berenberg Bank.

The govt. has only 155 MPs (Member of Parliament) and it will be very, very difficult for the government to get the support of an additional 25 MPs. It will depend who they present as the Presidential Candidate; the ruling party is now presenting a former EU Commissioner Stravos Dimas, who is also a member of the current establishment, as the presidential candidate.

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New ETFs On The Block: ALPS STOXX Europe 600 ETF (STXX)

104700912Despite several European economies struggling with deflation and de-growth, many marquee European companies that have with sizeable international exposure managed to beat earnings estimate in 2014.

The cold-response by the region’s lenders to European Central Bank President Mario Draghi’s recent launching of the Targeted Long-Term Refinancing Operation left the door wide-open for further policy easing by the central bank.

Adequate liquidity in the common-currency area coupled with falling crude prices are likely to boost demand in the 28-nation economic-union going into 2015.  That probably explains why fund issuers are still upbeat about the continent’s recovery despite annual inflation-rate plunging to record low levels in recent months.

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