ETF/No Load Fund Tracker Newsletter For Friday, August 2, 2013
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Friday, August 2, 2013
BULLS SHOW UP LATE TO KEEP RALLY ALIVE
U.S. equity markets rebounded off the morning lows to close narrowly in positive territory at record highs, extending yesterday’s rally, while the dollar weakened as traders digested a disappointing July nonfarm payroll report and what that means for future Federal Reserve policy.
Elsewhere, Treasuries rallied in the wake of the tepid data, which included a roughly in line read on personal income and spending, as well as smaller-than-expected rise in factory orders. The Dow Jones Industrial Average closed 30 points higher (0.2%) at 15,658, the S&P 500 Index gained 3 points (0.1%) to 1,709, and the Nasdaq Composite added 13 points (0.4%) to 3,689. The opening slip took place as investors reacted to a weaker-than-expected July jobs report.
Nonfarm payrolls increased 162,000 in July, below the consensus of 183,000. Additionally, the prior two months were revised down by a total of 26,000 jobs. Moreover, private sector payrolls increased by 161,000 in July, versus the forecasted gain of 195,000, after expanding by an downwardly revised 196,000 in June. However, the unemployment rate fell from June’s 7.6% rate to 7.4%, compared to the expected decline to 7.5%, as the civilian labor force participation rate dipped to 63.4% from 63.5%, and the number of persons employed part time rose for economic reasons.
Although the July job growth figure and previous revisions were disappointing, steady employment growth continues, with the economy adding an average of nearly 190,000 jobs over the past twelve months, enough to keep chipping away at the unemployment rate. Also, the outlook for further job growth appears to be intact.
Meanwhile, personal income rose 0.3%, below the consensus of 0.5%. Moreover, personal consumption expenditures (PCE) rose 0.5% in June, in line with the consensus. Inflation pressures picked up somewhat. The PCE price index rose 0.4%, while its core picked up 0.2%. Both measures, however, remain well below the Fed’s longer-term inflation target of 2.0%. Finally, factory orders rose 1.5% m/m in June, compared to the 2.3% increase that was expected by economists. Treasuries traded higher following the data.
Yield on the 2-year note declined to 0.30%, the yield on the 10-year note fell to 2.60%, and the 30-year bond rate dropped to 3.70%. Although stocks moved lower initially, the S&P erased almost all of its early losses as participants fell back on the Federal Reserve’s pledge to provide support to the markets for as long as economic data continues to paint a lukewarm picture.
The recovery effort in equities was assisted by the relative strength of consumer discretionary, materials, and technology sectors. Markets were higher on the week, as the DJIA gained 0.63%, the S&P 500 Index appreciated 1.1% and the Nasdaq Composite Index was higher by 0.38%.
Our Trend Tracking Indexes (TTIs) edged higher as well and closed the week as follows:
Domestic TTI: +3.90% (last week +3.32%)
International TTI: +7.45% (last week +6.66%)
Have a great week.
READER Q & A FOR THE WEEK
All Reader Q & A’s are listed at our web site!
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A note from reader Bob:
Q: Ulli: I have a question that has come to my mind a few times and was wondering if you could answer a question I have about M-Index on your Master Lists for both Funds and ETF’s.
What I was wondering is how the M-Index is calculated. I see you place the most emphasis on using this number to sort the Funds or ETF’s on a particular list. Better said that instead of sorting, I probably should save their ranking on each list. For me, knowing how the M-Index was calculated would help in my understanding of what you select as being most important in your ranking system.
Thank you for your help. Wonderful information you provide us.
A: Bob: The M-Index calculation is no secret. In #6 of the glossary it states this:
The M-Index (Momentum Index) shows the average non-weighted momentum ranking of a fund or ETF. The average is calculated from the existing 4wk, 8wk, 12wk and YTD momentum numbers. The higher the number, the more upside momentum a fund has.
However, volatility is increased at the same time. If you’re conservative, drop down a few
numbers from the top of the ranking food chain.
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