The Devil You Say!
19 March 2017
Last week was the anniversary of 666. Specifically, on March 9, 2009, the S&P was trading at a low of 666. Unknown to all, it was one of the greatest opportunities presented to investors in a long time to enter the markets! Last week markets continued the move higher with several sector and industry group ETFs hitting new highs. These include the Technology SPDR, HealthCare SPDR, Consumer Staples SPDR and Consumer Discretionary SPDR. Together, these four sectors account for over 50% of the S&P 500 and this means the bull market is doing just fine. Tech-related ETFs were strong with the Cloud Computing ETF, Semiconductor iShares, Internet ETF and Software iShares hitting new highs. Globally the FTSE All-World Stock Index ($FAW) is trading at a record high. The FAW includes stocks from 47 markets of developed and emerging countries. It recently cleared the 2015 high resuming a major uptrend. That's a positive sign because it shows that the stock market rally is global. The FAW is influenced by the U.S. markets which has soared to new record highs since November 4, 2016. We see, absent a black swan event, the markets continuing to move high but not at the rate we experienced from November 4th to March 1st. Because of this trend we will continue to watch for dips to enter the SPY ETF.
Markets Jump on Fed Rate Hike
16 March 2017
Janet Yellen in her testimony yesterday said the "simple message is the economy is doing well." The FOMC did not signal a faster pace of tightening as they kept their projections for two more 25 bp rate hikes this year. Markets reacted positively and moved up. We are always very cautious and do not issue alerts normally around the release of the Fed Minutes. What we did see that was interesting is that the banking stocks/sector sold off on the news of the rate hike. We thought this was strange and that since the hike directly helps banks that they would move up but they did not. Today the markets are slightly positive as of this writing. Crude oil and gold both look to move higher today as well. The EIA Energy reported an unexpected draw of 200,000 barrels (+3.7 million barrels consensus). Some of today's economic data includes February Housing Starts (consensus 1.260 million), Initial Claims (consensus 242,000), and March Philadelphia Fed (consensus 25.0) at 8:30 ET, while January JOLTS will cross the wires at 10:00 ET.
VIX Extremely Low - Markets Still Bullish
12 March 2017
Vix index has averaged just 11.6 points this year, compared to nearly 16 last year. Hedge funds systematically bet on volatility’s mean-reversion. Betting on falling volatility through the “XIV” ETF would have netted investors almost over 31% annually since the start of 2011. While long-volatility ETFs have been exceptional at destroying wealth. Of the $16 billion that flowed into them since 2010, a $14 billion has evaporated, this data is according to Deutsche Bank. While some are warning that the market is setting up for a significant correction we do not see it from out technical indicators. But trying to attribute every market up or down is a fool's errand. The day after President Trump's address to congress, the market gapped up in response; however, it immediately began a pullback over several days, which filled the gap and then some. The U.S. economy added 235,000 jobs in February, per the Labor Department’s release Friday. The unemployment rate also ticked down to 4.7% from 4.8% in the previous month. It's a vast improvement from 2009, when unemployment peaked at 10% after the financial crisis. Are there black swans lurking that could derail the market? Always! As we witnessed Thursday oil can have an effect on the trend as it dropped over 5% it pulled the SPY ETF down. Banking stocks are looking good because there are several expected rate hikes coming this year. But will the Fed hike rates given the reduced GDP forecasts? If there’s no rate hike watch for XLF and bank stocks to fall.