Equity Markets Celebrate A Delayed “Sinko De Mayo;” Fear Of Greece Exit From EU Spooks US Stocks

[Chart courtesy of MarketWatch.com]

US equities sank Tuesday as the Greek political uncertainty continued to haunt markets though major indexes managed to cut losses and clawed back to recoup earlier losses. Good thing, because for a while serious downside prospects loomed very large.

As Athens struggled to form a coalition government, Treasury yields sank to a three-month low as demand for the world’s safest securities spiked at a three-year US note auction.  The bid-to-cover ratio, a gauge of investor demand for securities on offer, was recorded at a robust 3.65 at the $32 billion 3-year notes auction as Greece faced the real prospect of a default by an advanced economy.

The Dow Jones Industrial Average (DJIA) closed down 76.44 points, recovering smartly from the 198 points drop during the day’s trade. All but 5 components of the 30-component blue-chip index closed lower.

The S&P 500 Index (SPX) dropped 0.4 percent with healthcare and utilities settling in the positive territory and consumer discretionary faring the worst among its 10 industry groups.

Benchmark 10-year Treasury yields dropped 3 basis points to close at 1.85 percent while yield on 30-year bonds shed 2 basis points to settle at 3.04 percent. The term premium, a valuation model created by the Fed, shows the reading has turned negative and investors are willing to accept lower than what can be termed as “fair value.”

ETFs in the news:

Though commodity markets were hit today with precious metals, base metals and sugar getting hammered, natural gas continued to surge, adding 4.3 percent on the day. This naturally NG linked ETF with the United States Natural Gas Fund (UNG) soared an impressive 4.73 percent. The U.S. Energy Information Administration had earlier in the day raised demand expectations for the year while cutting production forecasts, triggering the day’s rally.

Another gas-related product, the Invesco PowerShares Dynamic Oil & Gas Services Portfolio (PXJ) rose 1.03 percent as oil futures declined, partially offsetting NG gains. This ETF, however, saw a huge jump in volume with 1.97 million shares changing hands against a daily average of 64,800 shares.

As commodities got battered today and bullions took the hit, gold related ETFs fronted the day’s worst performer’s list. The Van Eck Market Vectors Gold Miners ETF (GDX) shed 3.43 percent on the day as the yellow metal miners retreated, taking a cue from precious metals.

Our Trend Tracking Indexes (TTIs) moved closer to their long term trend lines but still remain on the bullish side. However, the International TTI has dropped to within striking distance of breaking below its respective trend line and into bear market territory. Here are today’s closing numbers:

Domestic TTI: +3.67%

International TTI: +0.73%

Usually, before the trend line breaks actually happen, the trailing sell stops for most equities will have kicked in prior alerting you to step aside. You can see the latest effect of the recent sell off on our model ETF portfolios tomorrow morning when the latest update will be posted just shortly after 6 AM PST.

Disclosure: No holdings

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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