Stocks Rally Early; But End Up Subdued By Yellen’s Remarks

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks were rallying early today, riding the wave up from yesterday, however, the momentum was brought to halt shortly after Janet Yellen made a comment about the stock market being “substantially stretched” in terms of valuations. The Dow ended the day barely above water by 0.03%, while the Nasdaq lost 0.5% and the S&P dropped 0.2%.

Early gains were mostly due to earnings announcements by JPMorgan Chase (JPM), Goldman Sachs (GS) and Johnson & Johnson (JNJ) that beat Wall Street estimates. Apparently, investors did not favor some M&A news today, as we heard Cigarette maker Reynolds American (RAI) is buying rival Lorillard (LO) for about $27 billion. Shares of Lorillard sank 6.9% and Reynolds dropped 6.9%.

Don’t be surprised if investors turn attention back to China tomorrow. China, the world’s No. 2 economy, is due to report its second quarter GDP numbers on Wednesday. Premier Li Keqiang raised hopes for an upbeat outcome by commenting last week that growth improved from 7.4% in the first quarter, but let’s see what the data says.

Our 10 ETFs in the Spotlight went sideways but 1 of them managed to eke out a new high.

2. ETFs in the Spotlight

In case you missed the announcement and description of this section, you can read it here again.

It features 10 broadly diversified ETFs from my HighVolume list as posted every Monday. Furthermore, they are screened for the lowest MaxDD% number meaning they have been showing better resistance to temporary sell offs than all others over the past year.

Here are the 10 candidates:

MaxDD

All of them are in “buy” mode, meaning their prices are above their respective long term trend lines by the percentage indicated (%M/A).

Year to date, here’s how the above candidates have fared so far:

YTD

To be clear, the first table above shows the position of the various ETFs in relation to their respective long term trend lines (%M/A), while the second one tracks their trailing sell stops in the “Off High” column. The “Action” column will signal a “Sell” once the -7.5% point is taken out in the “Off High” column.

3. Domestic Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) pulled back as the markets lacked a clear direction:

Domestic TTI: +2.97% (last close +3.33%)

International TTI: +3.35% (last close +3.64%)

Disclosure: I am obliged to inform you that I, as well as advisory clients of mine, own some of these listed ETFs. Furthermore, they do not represent a specific investment recommendation for you, they merely show which ETFs from the universe I track are falling within the guidelines specified.

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