Views From The Hill

View From the Hill: Positive Economic Data and Gains Misleading As Volume Says Otherwise

Market Commentary: August-3-2016

bulls-and-bears4Some positive economic data releases gave bears a chance to pause. Starting with Germany, which is the EU’s locomotive engine for growth, it reported robust PMI readings @ 55.3 for Composite levels and 54.4 for Services. Signs of expansion and ongoing strength were also apparent in the EU region overall based upon July-2016’s PMI @ 53.2 for its Composite and @ 52.9 for Services. Great Britain’s Services PMI remained unchanged and in contraction mode @ 47.4. Lastly, another piece of significant economic data was the ADP Employment Report for July-2016 coming in @ 179k vs. consensus @ 165k and prior month’s new jobs @ 172k.


Market Condition

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ETF Performance Summary

Equities: All the above gave equities a reprieve from recent waves of selling, but don’t be fooled by the gains. Wednesday’s volume simply was not there, which suggests that the bulls are temporarily losing control of this market.  Trading on lower than average daily volume by the following percentages were the S&P 500 (SPY) @ -45%; the Nasdaq 100 (QQQ) @ -36%; the Russell 2000 (IWM) @ -38%; Emerging Markets (EEM) @ -36%; and China (FXI) @ -36%. Meanwhile, Brazil (EWZ) continued upon a divergent path from major global equity markets as it advanced +2.48% on +13% higher than average volume.

Bonds: In terms of price performance, the bond market was relatively flat, but investors clearly had more of an appetite for corporates vs. treasuries as Aggregated Bonds (AGG) and Investment Grade Corporates (LQD) respectively traded on +42% and +34% higher than average volume. 20+ Year Treasuries (TLT), however, were being sold into market strength, so bond investors may want to avoid this group.

Currencies:Wishing that I could sing praises for the US Dollar Bullish Index (UUP), but I am afraid not as the correction continues. Among the other currencies, the Euro (FXE) is still trading within its bearish trend and  correcting. After encroaching upon double top territory, the Yen (FXY) could be due for a correction of its own.

Commodities: Although the Deutsche Bank Commodities (DBC) and US Oil Fund (OIL) may have been up, their trends are still bullish. Gold (GLD) is consolidating and getting a much needed rest.

Real Estate: Lastly, real estate assets (IYR, ITB, and REZ) are market leaders, but their dominance could be overshadowed by a short-term correction.

Stay tuned and stay Hillbent…


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