The 2 Factors Driving The Market

THE FINAL NUMBERS - ANOTHER ROLLER COASTER RIDE NEWS: The market toyed with gains and losses all day once again as the financials and energy drove the market. When the closing bell rang the Dow had a gain of 81 points or 0.7%. The S&P500 also gained 0.7% or 8 points. The NASDAQ tacked on 1% or 22 points and the Russell 2000 gained 1% as well.

THE BOTTOMLINE: One day does not make a market, so even though the major indices rallied to close near the day’s high, there is a lot of work to do for the bulls. The good news is that there have been some nice up days thrown into the mix lately. The bad news is that each down day trumps the ups days and the net result is lower price for the indices.

The fact the market held onto gains into the close as oil surged is a good signal that the oversold readings may finally spark some buying interest. Long-term investors should continue to fine-tune their portfolios and hold off on any major purchases until a bottoming process begins.

McCALL’S CALL - TWO FACTORS DRIVING THE MARKET

NEWS: The volatility in the US market has stocks moving from big gains to insurmountable losses in a matter of hours. Take a long lunch and you could miss a 2% move in the Dow. The reason stocks have been so volatile and the drivers of the market are two factors: oil and financials.

THE BOTTOMLINE: Today was a great example of how oil and the financials affect the stock market. After opening higher this morning the market fell as negative news regarding both Freddie Mac and Fannie Mae hit the wires. The Dow was down as much as 60 points and the financials were the culprit. After giving the rally another attempt mid-afternoon, the Dow gave up a 60-point gain as oil moved from unchanged to a gain of $5. The spike in oil sent the Dow back into negative territory as another rally failed.

It is clear that weakness in the financials and strength in oil are the backbone to the bears case, but if either one decides to move in the opposite direction, look for an immediate market rally. Granted earlier this week, oil did pullback and the market did not rally, but it was fighting new lows for the financials. Any type of sustainable bottoming process for the financials or the oil bubble bursting will be a recipe for a market bottom. Until that takes place, you can expect more volatility with the intermediate-term trend lower. **This can change quickly so you must be prepared.

THE DAILY ETF UPDATE - IN TO AFRICA (AND THE MIDDLE EAST)

NEWS: This week the PowerShares MENA Frontier Countries ETF (PMNA) began trading, becoming the second “frontier markets” ETF available for investors.

THE BOTTOMLINE: PMNA joins the Claymore BNY/Mellon Frontier Markets ETF (FRN), which began trading in June. Though they both tout themselves as frontier market ETFs, they differ dramatically. PMNA focuses solely on North Africa and the Middle East and FRN has exposure to a number of continents. PMNA definitely gives investors exposure to true frontier countries, but because it is limited to such a small geographical region, the risk is high. The countries with the most exposure are: Egypt, Kuwait, Jordan, and Morocco.

FRN on the other hand has 62% of all its assets in three countries that are on different continents: Poland, Chile, and Egypt. The exposure to Africa is only 20% (Egypt and Nigeria). If the goal is to invest in Africa, your best bet is PMNA. For exposure a wide array of frontier and emerging markets, look to FRN. OR, you can wait for a handful of new ETFs that will be available soon from a number of companies, including Van Eck.

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