Investors have poured into U.S. mutual funds and
at a record rate in recent weeks. But some investment strategists
see some warning signs. Could this be the rash of buying typical
at market tops?
funneled a record $34.4 billion into U.S. equity mutual funds and
ETFs this month (through Wednesday, July 17), booking the
second-highest monthly inflow on record, TrimTabs Investment
Research reported Friday.
Mutual funds absorbed $8.7 billion and ETFs $25.8 billion.
Meanwhile, investors fled bond funds to the tune of $77.3 billion
since June as bond prices tumbled and interest rates soared to
However, the TrimTabs' in-house indicator measuring investor
demand skidded to a six-month low.
"Our demand indicators continued to turn less favorable in the
past week, and traders should definitely consider paring long
positions," TrimTabs wrote in a report. From a contrarian
perspective, massive inflows into ETFs are bearish for stocks in
the short term, the firm contends. Since the start of July,
corporate takeovers and stock buybacks totaled $16.2 billion,
swamping the IPO market, totaling $6.2 billion.
Fewer Stocks Supporting New Highs
SPDR S&P 500
) ended the week ahead 0.99% to 169.17 -- a historic record --
after rising for four weeks straight. It's returned an
eye-popping 19% year to date.
PowerShares QQQ (
), tracking the 100 largest nonfinancial stocks on the Nasdaq,
shed 0.94% for the week. It's surged 15% year to date.
has eclipsed its former high from two months ago, but fewer
stocks are hitting new highs currently than in May, which
suggests weaker market internals.
"We're retesting the old peaks on the New York Composite
Index, but (the number of) issues making new yearly highs is
attenuating," The Todd Market Forecast told clients in Friday.
"I'm a bit concerned."
Of the 91 S&P 500 companies that have reported
second-quarter earnings so far, about two-thirds (65%) have beat
expectations, according to Thomson Reuters. Nearly half (49%)
have topped revenue forecasts.
Overall second-quarter earnings are projected to grow 2.8%
year over year. For every company that has issued positive
pre-announcements, six have issued negative outlooks. "If it
persists, this would be the most negative negative/positive ratio
since first-quarter 2001," Thomson Reuters said in a report.
IShares MSCI EAFE (
), tracking developed foreign markets, rose 1.47% for the week.
In regaining its 50-day moving average this past week, it
confirmed it's in a solid uptrend.IShares MSCI Emerging Markets (
), added 0.86% to 39.28. Although it's climbed higher the past
two weeks, it still trades deep below both its 50- and 200-day
moving averages, indicating a strong downtrend. EFA is up 7% year
to date while the EEM lost 11%.
While the U.S. market has outpaced all global markets this
year, some asset managers doubt it can maintain its leadership
for long. "By several yardsticks, the U.S. market is presently
more richly valued than stocks in developed and developing
countries," said Gregg Fisher, founder and chief investment
in New York. "At some point, sooner or later, some other
investment will take the baton and globally diversified
portfolios will once again look attractive relative to
Peter Schiff, an outspoken critic of Federal Reserve policies,
says U.S. fundamentals fail to support higher stock prices.
"The data makes it clear that while asset prices (stocks,
bonds, and real estate), are currently being inflated by an
activist monetary policy, the real economy continues to
stagnate," Schiff, CEO and chief global strategist of Euro
Pacific Capital of Westport, Conn., wrote Friday. "The staggering
growth in government debt, the persistence of high unemployment,
the stifling effects of new rounds of anti-business regulations,
the existence of dangerous asset bubbles, and our dependence on
zero percent interest rates and continuous Federal Reserve
purchases of Treasury and mortgage debt qualify our current
economy as a walking zombie."
SPDR Gold Shares (
) rose 0.77% for the week, ending at 125.08. It has risen the
past two weeks but appears to be staging a countertrend rally in
a long-term downtrend. It still trades deep below its 50- and
200-day moving averages, which is very bearish. It's melted 23%
year to date.
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