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ETF Market Trends (11-30-2009): Uninspiring Price Performance and Unimpressive Volume

|Includes:AFL, AIG, DE, DIA, IWM, JNPR, NUE, QQQ, SPDR S&P 500 Trust ETF (SPY), TXI, X

Dear readers:

Here is a portion of the 
ETF Market Trends™ report which was published on Monday. To view the entire report (and the ETF trend monitor) and/or gain instant access to it on a daily basis well before the subsequent trading sessions, please visit Hillbent's ETF Market Trends™ section.


ETF Market Direction Summary (11-30-2009)

The market spent the majority of the day fixated on Dubai World's potential default and was unable to rationally come to terms with its implications until much later in Monday's trading session.

U.S. banks have very little exposure to this event and have plenty of their own problems to resolve, which are much greater in comparison. The market already knows this and believes it may have appropriately discounted the obvious (though some may argue otherwise).

Another drag on the market was the perception of soft sales results from "Black Friday". If true, some investors are concerned that some retailers could still find themselves in the red this holiday shopping season.

The U.S. dollar flipped and flopped during the day and finished in slightly negative territory. Commodities and emerging markets benefited the most from the dollar's weakness while developed markets in the U.S. and Europe were positive but relatively weaker.

Overall, I found the price performance to be quite uninspiring and the volume unimpressive. Neither bulls nor bears can truly claim victory today.

The trends for broad equity indices remained relatively unchanged while there were a few upgrades to several key industry exchange traded funds.


Price Volume Analysis (PVA) for Hillbent 3000: Today's buying patterns may appear bullish, but relative to last Friday's post-Thanksgiving trading session, they were pretty unimpressive. A sample survey of the 30 Dow Industrial components reveals that only a final hour volume buying surge disguised what was truly a lack of interest. Hopefully, tomorrow's action will provide better clues.

  1. PUVU: price up & volume up (most bullish) @ 50.7%
  2. PUVD: price up & volume down (indicative of distribution and selling into strength) @ 3.1%
  3. PDVU: price down & volume up (contrarian bullish signal for capitulation and transfer of stocks from weaker hands) @ 41.8%
  4. PDVD: price down and volume down (most bearish based upon lack of buyers to establish support) @ 2.4%

(*Note that the Hillbent 3000 screens the top 3000 market capitalization stocks with a minimum average daily volume of 100,000 shares and also includes ADRs that fall within these parameters. This group represents at minimum @ 95%+ of the aggregate market capitilization of more than 8000 equity issues trading on U.S. exchanges.)


Bullish Events

  • Economic Data:
  1. November's Chicago Purchasing Managers Index report exceeded expectations @ 56.1 vs. consensus @ 53.0 and previous month @ 54.2. Indepth analysis of the report can be found at Econoday.
  2. Treasury Auctions: Demand for the weekly Treasury bill auctions was strong with coverage @ 3.89 for the 3-month and @ 3.55 for the 6-month issues.
  3. Global Trade Flows: A key concern in recent months has been that the run-up in markets and commodities was speculative in nature. Fortunately, it is accompanied by a strong resumption in global trade flows. According to data just released by the CPB Bureau of Economic Policy, global trade volume increased to a record 5.3% in September. Imports from industrialized nations rose 4% m/m and 20% yr/yr. This positive news negates concerns that the run-up in commodity prices is being driven by speculators.
  4. India's Economy: India's GDP Growth was 7.9% higher in the three months up to Sept-30-2009 vs. the previous quarter's growth rate @ 6.1%. Analysts were expecting an average growth rate @ 6.3%. Contributing to the growth were mining, manufacturing, construction, and energy sectors.
  • Notable Upgrades:
  1. Cement Industry: An analyst from Davenport upgraded Texas Industries (NYSE:TXI) based on valuation and its relative underperformance to the S&P 500. Its stock is trading @ 14.9x EBITDA for FY2010 and 13.6x EBITDA for FY2011.
  2. Health Insurance Industry: Credit Suisse issued an upgrade on Aflac (AFL) to outperform with a $60 target price.
  3. Agricultural Machinery Industry: Deere & Co. (NYSE:DE) received numerous upgrades from analysts.
  4. Steel Industry: Goldman Sachs upgraded U.S.steel stocks as a group from neutral to attractive. Companies specifically mentioned were Nucor (NYSE:NUE) which it raised from neutral to attractive and U.S. Steel (NYSE:X) which it added to its conviction buy list.
  5. Technology Industry: Juniper Networks (NYSE:JNPR) was upgraded to a buy by Ticonderoga Securities. Its analyst sees spending on next generation IP networks by service providers accelerating over the next 18 months and projects the company will return to profitability in 1Q-2010.
  • Weaker Dollar: A weaker dollar lifted commodity and emerging market securities as appetite for riskier assets rebounded after the UAE central bank stated that it will stand behing the country's local and foreign banks facing potential losses due to Dubai World's possible default. The Abu Dhabi-based Central Bank of the U.A.E. announced that banks would be able to borrow money @ 0.50% above the three-month local benchmark interest rate currently @ 1.941%
  • Carryover from Asia: Asian markets closed mostly higher on above positive news from the U.A.E. Japan up +2.91%, Hong Kong +3.25%, China +3.82%, Taiwan +1.22%, Australia +2.83%, Singapore -1.09%, South Korea +2.00%, India +1.77%.
  • China Economic Policy: The Chinese government reconfirmed its willingness to maintain stimulus policies throughout next year.
  • Bullish Outlook for Asia: Goldman Sachs, Citigroup and BNP Paribas issued positive investment outlooks for Asian-Pacific equities next year. Goldman forecasted returns @ 36% ($USD); BNP Paribas projects @ 20% upside ($USD); and Citigroup predicts returns @ 14% ($USD).
  • Japan: BOJ Governor Shirakawa pledged to take action against deflation in order to support economic stability. He indicated that he is willing to intervene if necessary. The yen is currently trading at a 14-year high vs. the dollar.

Bearish Events

  • Notable Downgrades: 
  1. Sanford C. Bernstein & Co. reduced it target price on American International Group Inc. (NYSE:AIG) by 40 percent to $12 and estimated the company has an $11 billion deficiency in insurance reserves.
  2. UBS AG reduced its allocation to financial shares to neutral from overweight due to the run-up in share prices and challenges in regulatory reform, loan growth, margins, and high loan loss provisions. Affected bank stocks were RBS and Lloyds Banking Group Plc.
  • European Market Outlook: According to Morgan Stanley strategists, European stocks could decline @ 5% by the end of 2010 as stimulus measures are withdrawn by governments.
  • European Banks: Bank of Ireland Plc stated that it may incur a loss of 3.4bn euros ($5.1bn USD) on loans sold to Ireland's so-called bad bank.
  • November's Euro-Zone CPI rose more than expected to +0.6% yr/yr and marked the region's first increase in 7 months.


ETF 5 Day New Highs:

U.S. Equities (NYSEARCA:FAA); International Equities (NYSEARCA:EWJ); Commodities (DBA, DBB*, DBC, PTM*); Forex (FXY*); Bonds (AGG, BWX*, IEF, MBB, MUB, SHY, TIP*, TLT); Real Estate (NYSEARCA:RTL). (Note * denotes 250 day new high)

ETF 5 Day New Lows:

U.S. Equities (IWM, SPY, PHO, RTH, SWH); International Equities (EWU, EWM, IF); Forex (BZF, CYB); Bonds (NYSEARCA:EMB); Real Estate (FIO, REM, XHB). (Note * denotes 250 day new low)


Signing off at Hillbent on The Market Direction and ETF Market Trends...

Hillbent Market Direction Resources

Investor's Selected Reading:

Economic Calendar Events: Refer to U.S. Calendar or International Calendar

Postive & Negative Earnings Surprises: Refer to Hillbent's earnings summary report for a detailed analysis of positive & negative earnings surprises.





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