Nasdaq Sets Record—Gold Hits New All-Time High

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The Dow raced ahead and ended just short of a 400-point gain, but gold again outperformed with another solid +1.53% showing. The S&P closed within 1.7% of its all-time high.

The mood was upbeat, not because of facts, but merely hope of further stimulus from the government to assist the out-of-work Americans. However, concerns surfaced that Friday’s widely anticipated payroll report may show that the rise in Covid-19 infections could have stalled the recent revival of business activity.

Added MarketWatch:

Payroll provider Automatic Data Processing Inc. ADP, also said only 167,000 private-sector jobs were created in July, far short of the 1.88 million forecast by economists polled by Econoday. However, a reading of services from the Institute for Supply Management service sector index jumped to a reading of 58.1 in July, beating expectations and signaling stronger economic growth.

While tech trailed the other 2 indexes today, the Nasdaq nevertheless has now closed higher in six straight sessions and has been outperforming the Dow and S&P 500 YTD, but it is still lagging gold, which again roared into record territory.

This word of caution came from ZH:

A body in motion will remain in motion.

And while tech bulls will pounds the table and vow that the current tech bubble is far less dangerous than the dot com bubble of 2000, the reality is that that fwd multiples are now exponential and it is only a matter of time before this particular law of Newton encounters a sufficient painful “external force” that will burst the current tech bubble too.

In the meantime, as you would expect from gold’s surge, the negatively affected asset class is the US Dollar, which, thanks to the reckless money printers at the Fed, continues its path of least resistance—down.

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Equities Recover, But Gold Excels

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets

This morning, we saw another weak opening with the major indexes zigzagging and being pulled into the red before another magic last hour ramp pushed equities to a green close.  

Mid-day, stocks obliterated some of their gains, as House Speaker Pelosi announced that she “doesn’t think there will be a deal this week,” referring to the endless back and forth about the size of the planned stimulus package.

She raised the ante to $3.4 trillion from $3 trillion, which is a far cry away from the Republican’s proposal of $1 trillion. This has the feeling as if someone wants to crash the markets.

While that did not happen today, we saw a pullback in stocks, Treasury yields tumbling to a record closing low, while gold rocketed to new record highs, with the spot price braking the $2,000 level by a wide margin.

News headlines were confusing, as ZH pointed out:

1142ET Pelosi: “doesn’t think there will be a deal this week.”

1415ET *SEN. PERDUE SAYS SENATE STIMULUS TALKS MAY TAKE ANOTHER 2 WEEKS

1425ET *MCCONNEL: WILL NOT FIND TOTAL GOP CONSENSUS ON VIRUS RELIEF

1450ET *SCHUMER SAYS NOT GOING TO STRIKE A DEAL JUST FOR THE SAKE OF IT

1455ET *SCHUMER SAYS HE IS HOPEFUL, TALKS MOVING FORWARD BIT BY BIT

The Nasdaq was trailing the indexes today, which is to be expected after the sizzling run up, we have seen. The reason is in part that its big component, namely the FANG stocks, have been stuck in a trading range over the past three days, as Bloomberg demonstrates here.

Until a breakout occurs, big tech maybe treading water for a while.

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Rallying into August

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Friday’s last hour rebound served as a foundation for further advances, as the major indexes did not skip a beat, opened to the upside, never looked back, and ended up scoring another green close, which greatly benefitted our current positions. Helping matters was the impact of another strong short squeeze.

As we’ve seen in the past, the tech sector (Nasdaq) ruled by showing the strongest gains and surging to another high, while the S&P 500 placed 3rd among the major indexes.

After a solidly higher opening, GLD bounced around aimlessly, slipped into the red but managed a nice bounce back into the close. It seems that the $2k glass ceiling appears to present formidable overhead resistance, but it will be broken eventually. Today, gold’s weakness was caused by a rallying dollar.

In economic news we learned that a manufacturing gauge rose while new orders jumped better than had been expected, which helped the bullish cause but still raised questions about its sustainability. Similar positive numbers in Europe and China supported their markets as well.

In terms of a new stimulus package, MarketWatch reported:

Market participants were also focused on the fact that there are no signs of a stimulus package between Democrats and Republicans after negotiations over the weekend failed to yield a replacement for a $600-a-week boost to unemployment benefits that expired Friday.

At issue for Democrats and Republicans is the amount of unemployment assistance for Americans. The White House has come out in favor of reducing the federal assistance to $200 a week, Democrats have called for keeping it at $600 a week. However, the parties appear to both support a fresh round of stimulus checks of $1,200 for workers.

Right now, upward momentum continues, and we will stay on board subject our exit strategy.

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ETFs On The Cutline – Updated Through 07/31/2020

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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 198 (last week 198) 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 July 31, 2020

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ETF Tracker StatSheet          

You can view the latest version here.

CLOSING THE WEEK WITH A BANG

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After Big Tech delivered blow-out earnings after the close yesterday, the futures market had the Nasdaq up by some 2% stoking hopes that the regular cash market would follow that bullish premise.

It was not meant to be, as the major indexes, despite starting the session in the green, lost momentum and subsequently dropped below their respective unchanged lines, but gold resisted the sell-off.

The Nasdaq fared the best despite mixed earnings results, disappointing econ data and the same inconclusive jawboning about the next corona virus rescue package by Dems and Reps on Capitol Hill.  

Just as thigs looked the bleakest, a powerful rally pulled equities out of their doldrums, momentum reversed, and we closed out the week and the month with a bang. If you had to guess which asset class scored the best during July and said the “Nasdaq,” you would be wrong, as this chart shows:

Gold (GLD) was the clear winner with +10.79% with the Nasdaq (QQQ) taking a distant 3rd place despite a respectful +7.35%, and the Dow being the laggard with +2.38%.

This asset bubble has now been seemingly blown out of proportion, thanks to Fed intervention, with ZH pointing to these stats:

All-time high monthly close in S&P 500

All-time low 10Y yield close

All-time high in gold

And then summing up the month:

Stocks up, Bonds up, Gold up, Silver up, Oil up, Crypto up, Dollar Down (along with Fed credibility.)

Be that as it may, the major trends for our selected ETFs remain bullish and will keep us invested until a substantial reversal occurs that triggers our exit strategy.   

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 07/30/2020

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ETF Data updated through Thursday, July 30, 2020

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 a 7.5% 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 7.5% -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 +3.43% and is in “BUY” mode as posted.

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