Walking Back “The Talk”

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Supporting the initial comeback bounce in the markets was Treasury Secretary Yellen, who completely reversed her hawkish talk on interest rates.

ZeroHedge presented it this way:

“Let me be clear it’s not something I’m predicting or recommending,” Yellen says about rates, flip-flopping her earlier perspective entirely.

Then she addressed the issue of inflation, toeing the establishment line that it will be “transitory” for the next six months or so…

She added that if there is an inflation problem, she is certain the Federal Reserve can be counted on to address it.

That’s all it took to pull the major indexes out of the basement and into green territory, at least early on and before the roller coaster ride opened up. Supporting actors were strong earnings results and general optimism, but they did not help the Nasdaq to return above its unchanged line.

Volatility picked up in part due to inflationary forces being hard at work, with the Bloomberg Commodity Index adding another up day, it’s 16th straight and the highest level since 2015. However, keep in mind that the Fed considers this “transitory,” though they are living under the illusion that they are equipped to control accelerating prices.

A major sell program kicked in later in the session and took the starch out of upward momentum, just about the time as the Biden administration supported the waiver on Covid vaccine-patents at the WTO, as ZH pointed out.

Bond yields spiked initially above the 1.6% level but sold off into the close dropping to 1.57%. The US Dollar trod water all day and traded in a tight range, while Gold managed to eke out a small gain but was unable to conquer its $1,800 level.  

And, as we have seen lately, “value” outperformed “growth.”

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Fear Of Higher Rates Spanks Markets

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After yesterday’s strong bullish bounce into May, the picture looked anything but warm and fuzzy this morning, when the major dropped sharply but managed to rebound off their lows, however, only the Dow climbed back into the green.

The Nasdaq had its worst day since March, as fears of rising inflation, concerns of higher bond yields as well as the Biden administration’s potential tax hikes extracted their pound of flesh from the tech sector.

It was none other than Treasury Secretary and former Fed head Janet Yellen, who put the bulls on notice that changes might be forthcoming. Here are her highlights:

“It may be that interest rates will have to rise a little bit to make sure our economy doesn’t overheat.”

“We’ve gone for way too long letting long-term problems fester in our economy.”

Ouch! That was enough to send the markets reeling, and— stocks puked as one would expect at the first signs of the punchbowl being taken away…as ZeroHedge commented so eloquently.

That was followed up by another bon mot, namely: We wonder what Jay Powell will have to say about Janet stepping on his toes? Did she just start the process of thinking about thinking about thinking about normalization?

Tongue in cheek comments aside, the US Dollar jumped after Yellen’s remarks, which demolished Gold’s early gains and pushed the precious metal back into the red. Value outperformed Growth with RPV storming back into the green during the afternoon recovery.

The 10-year bond yield chopped around aimlessly but ended up below the 1.6% level. For sure, as I have commented on may occasions, inflation is a concern and you only need to look at trend of the Commodity Index, which continued its rise to the highest since 2011, as ZH pointed out.

And again, via ZH, Bloomberg updated the Global Liquidity Proxy, which shows that, absent of further stimulus, the S&P 500 may drop but find support around the 3,900 level.   

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Surging Into May

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The major indexes, except for the Nasdaq, continued last month’s bullish theme on the first trading day of May by vacillating above their respective unchanged lines, as the Dow led with a 0.70% gain.

With the continual reopening of the economy retailers benefited, also supported by New York Gov Cuomo’s announcement that most capacity restrictions will be lifted across NY, NJ, and CT with 24-hour subway service in NY City to resume later this month.

Traders now are worried about the truism of the adage “sell in May and go away,” which CNBC explained like this:

Data going back to 1928 shows that the May-October period has the lowest average and median returns of any six-month period of the year with the S&P 500 up 66% of the time on an average return of 2.2%, according to Bank of America.

However, right now another busy earnings week is on deck with much attention being given to Friday’s widely watched and eagerly expected jobs report.

The US Dollar tanked, while 10-year bond yield followed suit by breaking back below its 1.60% level, both of which are the ideal combination to push Gold higher. Today was no exception, and the precious metal rallied 1.39% stopping just short of its $1,800 level.

With inflationary fears rising, it came as no surprise that the Commodity index surged adding some 1.12% in the process and continuing its ascent to higher prices.

ZeroHedge, in its infinite and spot on wisdom proposed that we need a bigger global balance sheet, as Bloomberg charts here, or dire consequences, like a slipping market, may be on the horizon.

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ETFs On The Cutline – Updated Through 04/30/2021

Ulli ETFs on the Cutline Contact

Below, please find the latest High-Volume ETF Cutline report, which shows how far above or below their respective long-term trend lines (39-week SMA) my currently tracked ETFs are positioned.

This report covers the HV ETF Master List from Thursday’s StatSheet and includes 312 High Volume ETFs, defined as those with an average daily volume of more than $5 million, of which currently 251 (last week 253) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line (%M/A) from those that have dropped below it.

Take a look:                                                                   

The HV ETF Master Cutline Report

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms. If you missed the original post about the Cutline approach, you can read it here.

ETF Tracker Newsletter For April 30, 2021

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

EQUITIES SLUMP ON LAST DAY OF APRIL

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The futures markets already indicated a weak opening with traders deciding, despite good economic data and some blockbuster earnings (Amazon) but also some disappointments (Twitter), to cash in some of their chips.

As a result, the major indexes hovered in the red all day and closed with acceptable losses, considering that for the month the S&P 500 gained some 5%. The pullback was broad based with only a couple sectors sporting modestly green numbers.

For the month of April, all equity indexes scored gains with the Nasdaq in the lead and Small Caps lagging. Even Gold managed to climb some 3.5%, but the US Dollar continued its slide, down almost 2%, which was its first monthly loss since December 2020, according to ZH.

Not everyone thinks we are in a “Goldilocks” environment:

“The fact that 95% of the S&P 500 is now above its 200-day moving average is NOT a bullish sign,” Matt Maley, chief market strategist for Miller Tabak + Co., wrote in an April 26 note.

“Yes, a high number of stocks above their 200 DMA’s is usually positive, BUT it is NOT bullish when the number becomes extreme (like it is now…at 95%). In other words, this data point is much like sentiment. When it is strong, it is positive…but when it becomes extreme, it becomes a contrarian indicator!”

Maybe so, but right now the major trend remains up, but should it reverse, we have our exit strategy in place and will be ready pull the trigger, should the need arise.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 04/29/2021

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ETF Data updated through Thursday, April 29, 2021

Methodology/Use of this StatSheet:

1. From the universe of over 1,800 ETFs, I have selected only those with a trading volume of over $5 million per day (HV ETFs), so that liquidity and a small bid/ask spread are assured.

2. Trend Tracking Indexes (TTIs)

Buy or Sell decisions for Domestic and International ETFs (section 1 and 2), are made based on the respective TTI and its position either above or below its long-term M/A (Moving Average). A crossing of the trend line from below accompanied by some staying power above constitutes a “Buy” signal. Conversely, a clear break below the line constitutes a “Sell” signal. Additionally, I use an 8% trailing stop loss on all positions in these categories to control downside risk.

3. All other investment arenas do not have a TTI and should be traded based on the position of the individual ETF relative to its own respective trend line (%M/A). That’s why those signals are referred to as a “Selective Buy.” In other words, if an ETF crosses its own trendline to the upside, a “Buy” signal is generated. Since these areas tend to be more volatile, I recommend a wider trailing sell stop of 8%-10% depending on your risk tolerance.

If you are unfamiliar with some of the terminology, please see Glossary of Terms and new subscriber information in section 9.     

1. DOMESTIC EQUITY ETFs: BUY — since 07/22/2020

Click on chart to enlarge

Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) has now rallied above its long-term trend line (red) by +20.68% and remains in “BUY” mode as posted.

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