Powell’s Remarks And Tesla’s Triumph Drive Market Dynamics

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The markets were in limbo this morning after Fed head Powell’s comments that progress on inflation has been made, but that he’s not ready to cut rates yet. That caused the indexes to vacillate with traders being unsure what to make of those remarks.

He then added that “we want to be more confident that inflation is moving sustainably down toward 2%, before we start the process of loosening policy.” Bond yields eased a bit, and stocks were pulled in different directions.

Eventually, the major indexes found a base from which to start a rally, as traders decided to interpret Powell’s cautionary words as good news for the markets—and up we went without looking back.

Giving an assist was an announcement that government job openings suddenly surged, while regular jobs were a tad better than expected, which helped send rate-cut expectations higher.

Tesla stock had great day by being up almost 10% on beating delivery expectations. I find that puzzling after reports pointing out that almost half of all EV owners would switch back to gasoline powered vehicles.

The Mag7 stocks rocketed higher based on Tesla news, also helped by sinking bond yields, which pulled the dollar off its lofty level.

Gold wandered sideways, and crude oil touched a new 2-month high before losing momentum into the close. Bitcoin’s attempt to recover its $64k level failed, and the coin closed just below $62k.

As ZH pointed out, macroeconomic surprises happen almost daily, but now they have spread around the world and broken into negative territory.    

Does that mean the ball is now in the Fed’s court?

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AI’s Promise Amidst Economic Pessimism: A New Era For Tech And Productivity

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

A choppy opening marked the first day of trading in July. Despite tech stocks edging higher there seemed to be some rotation out of that sector, as Nvidia slipped some 3% and leading other compatriots like AMD and Broadcom lower.

While some traders might dismiss the AI development as just another temporary mania, I think it is of great benefit for companies to increase productivity and utilize technologies in ways never thought of before. It will likely also start new industries and discoveries as AI and new more powerful chips combine forces to push computer science to a whole new level.

On the economic side, we learned that manufacturing declined in June despite expectations for some improvement. As ZH pointed out, both hard and soft data disappointed with especially the former diving sharply. As a result, the Fed’s GDPNOW forecast for Q2 GDP dropped to 1.7% from 4.3% a month ago. Ouch!

Bond yields rose but strangely enough did not affect stock prices, as you might have expected. The most shorted stocks rode the roller coaster, the MAG7 group dumped and pumped, while Bitcoin advanced over the weekend.  

Gold trod water, crude oil rallied and reclaimed its $83 level, as that move will make its presence felt at the pump.

Back to Nvidia’s comparison with Cisco in the early 2000s. With the tech darling having shown some recent pullbacks, could this analog be still in play?

May be longer term, but right now we are facing the historically best seasonal two weeks for stock gains. Let’s see if this pattern repeats itself.

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ETFs On The Cutline – Updated Through 06/28/2024

Ulli ETFs on the Cutline Contact

Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.

The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (268 vs. 264 current).

Take a peek:

The HV ETF Master Cutline Report

If you are confused by some of the terms we use, don’t panic. I have a helpful Glossary of Terms for you.

If you want to learn more about the Cutline method and how it can make you rich (or at least less poor), read my original post here.

ETF Tracker Newsletter For June 28, 2024

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

H1 2024: A TALE OF RALLIES AND DISLOCATIONS – IS THE MARKET DANCING ON THIN ICE?

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The major indexes started the session on a positive note, as traders were pleased with the latest release of the Personal Consumptions Expenditure index. The PCE showed that inflation has slowed, and consumer sentiment was better than expected.

Core PCE, which excludes food and energy prices, rose only 0.1% last month and 2.6% from the prior year, in line with expectations. The headline number, including food and energy, was flat on the month and YoY (up 2.6%), according to MarketWatch.

Consumer sentiment for June rose to 68.2 from a preliminary 65.6 reading. The one-year inflation outlook unexpectedly fell from 3.3% to 3%. All the above prompted the Wall Street bulls to push the buy buttons—and off to the races we went, until it all fell apart.

Early enthusiasm waned, and the major indexes closed this session in the red but posted solid gains for the month and quarter.

Traders immediately assumed that a rate cut will be a possibility, and they are betting that the odds are 59.5% of the Fed lowering rates in September.

US Macro data disappointed in the first half of 2024 and crashed to its lowest point since 2016. Oddly enough, rate-cut expectations plunged YTD. Go figure…

The first half of the year sported rallies in stocks, gold (+13%), crude oil and Bitcoin, which ended H1 up 40%. Bonds lost, but the dollar showed some strength. Mega-cap tech supported the S&P 500 and the Nasdaq, but the broad market did not participate.

While traders are almost giddy about this year’s performance, caution is warranted as severe dislocations are lurking.

How about the S&P 500’s relentless climb vs. a deteriorating global balance sheet?

If history is any indication, this will not go on forever, which poses this question: Do you have an exit strategy?

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 06/27/2024

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, June 27, 2024

How to use this StatSheet:

  1. Out of the 1,800+ ETFs out there, I only pick the ones that trade over $5 million per day (HV ETFs), so you don’t get stuck with a lemon that nobody wants to buy or sell.
  1. Trend Tracking Indexes (TTIs)

These are the main indicators that tell you when to buy or sell Domestic and International ETFs (section 1 and 2). They do that by comparing their position to their long-term M/A (Moving Average). If they cross above, and stay there, it’s a green light to buy. If they fall below, and keep going, it’s a red light to sell. And to make sure you don’t lose your shirt if things go south, I also use a 12% trailing stop loss on all positions in these categories.

  1. All other investment areas don’t have a TTI and should be traded based on the position of each ETF relative to its own trend line (%M/A). That’s why I call them “Selective Buy.” In other words, if an ETF goes above its own trend line, you can buy it. But don’t forget to use a trailing sell stop of 12%, or less if you’re feeling nervous.

If some of these words sound like Greek to you, please check out the Glossary of Terms and new subscriber information in section 9.

  1. DOMESTIC EQUITY ETFs: BUY— since 11/21/2023

Click on chart to enlarge

This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has broken above its long-term trend line (red) by +5.22% and is in “Buy” mode as posted.

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S&P 500 Nears Year-End Predictions Amidst Housing Market Collapse And Inflation Fears

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Two of the three major indexes slipped early on, while the Nasdaq powered higher, as Nvidia edged up another 1% on top of Tuesday’s 7% gain. However, it had given most of it back by the time the closing bell rang.

The MAG 7 stocks bucked that wild ride and continued yesterday’s path higher on a smooth trajectory. Amazon was in the news as well, with the retail giant topping its $2 trillion market cap for the first time.

The S&P 500, despite notching a few losing sessions recently, is on track to close out the first half of the year with a gain of some 15%. That performance was due to the tech sector’s surge with Nvidia being up some 150% for the same period.

Of course, speculation runs rampant whether the recent pullback means the end of the bullish runup. After all, the S&P 500 is trading within 1% of what many strategists have considered to be its year-ending price level.

The broad market’s sluggishness is likely tied to trader anxiety about Friday’s inflation data release, namely the Fed’s favorite gauge, the PCE (Personal Consumption Expenditure price index). If this reading comes in lower than expected, Wall Street will rejoice and continue to push their agenda that rate cuts are on the horizon.

Today’s new home sales were a disaster, with markets literally imploding in May, as sales crashed 11.3% MoM, which was its biggest drop since September 2022. Median new home prices fell 0.9% YoY to their lowest since April 2023.

Mortgage rates have consistently remained above 7%, placing pressure on the Federal Reserve to intervene and provide relief to the housing market.

However, the Fed faces a challenging dilemma: lowering rates to stimulate the housing market could inadvertently fuel inflation to potentially unprecedented heights.

Not a good alternative.

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