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 253 (last week 245) 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.
New records were set again today, as the Dow and S&P 500 continued their ascent to ever new highs. Strong earnings from blue chip companies gave the assist, as well as data signaling that the economy has maintained its recovery.
We learned that the Consumer Sentiment Index rose to a one-year high, while Fed Gov Waller supported the bullish mood by remarking that despite the US economy taking off, there would be no reason to start tightening policy.
The last of the six largest banks, Morgan Stanley, posted stronger than expected results helping the financial ETF XLF to register a solid gain.
All three major indexes closed in the green, led by the Dow and S&P 500, with the Nasdaq being the weakling as the index barely crawled back above its unchanged line.
Bond yields bounced a tad today but remain under the 1.6% level for the 10-year. The US Dollar continued its slide, but Gold found some unexpected support, after China announced this (via ZH):
The People’s Bank of China (PBOC), the nation’s central bank, controls how much gold enters China through a system of quotas given to commercial banks. It usually allows enough metal in to satisfy local demand but sometimes restricts the flow.
In recent weeks it has given permission for large amounts of bullion to enter, the sources said.
“We had no quotas for a while. Now we are getting them … the most since 2019,” said a source at one of the banks moving gold into China.
Around 150 tons of gold worth $8.5 billion at current prices is likely to be shipped, four sources said. Two of the sources said the bullion would be shipped in April. Two others said it would reach China over April and May.
If that trend continues, we might see gold’s upward momentum finally reestablish itself, supported also by inflationary pressures, the likes of which we are all aware of, but which has been ignored by the Fed.
Be that as it may, for the time being, traders and analysts are viewing the current market environment as a “goldilocks” scenario and further advances are likely.
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 Termsand 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 +20.51% and remains in “BUY” mode as posted.
The unchanged line was nowhere near in sight, as the major indexes roared higher after the opening bell and never looked back with the Dow and S&P 500 reaching new all-time highs. Big tech surged and maintained their dominance over SmallCaps, while “growth” outperformed “value.”
Strong earnings and some economic reports painted a rosy picture for consumer spending and the jobs market. Bond yields dropped with the 10-year sliding to 1.56%, although the US Dollar index trod water.
Not just were stocks the beneficiary of the bullish theme, because of lower yields, Gold had its day in the sun and finally rocketed higher by 1.68%, while nearing two-month highs and outperforming even the Nasdaq
Much ado was made about the headline announcing that initial jobless claims dropped back below 600k for the first time since early March 2020. But, as ZH pointed out, this may have been an aberration:
Notably, the drop in claims was largely driven by a 75,645 drop in California… which, as Joe Brusuelas suggests, is indicative of the problems that remain in processing claims, backlogs, and fraud in the states.
Ah yes, the devil is always in the details…
Black Rock’s CEO Larry Fink described the current scenario like this:
I am incredibly bullish on the markets, and you are right to be worried about our deficits. If we don’t have economic growth that is sustainable over the next 10 years — our deficits are going to matter, and they are going to elevate interest rates … I believe because of monetary stimulus, fiscal stimulus, cash on the sidelines, earnings, markets are okay. Markets are going to continue to be stronger.
Optimism despite deficits and consumer inflation, but for right now traders’ minds are noticing nothing but bullish momentum.
After an early pump, the major indexes lost momentum with the S&P 500 and Nasdaq ending up in the red, while the Dow managed to stay above its unchanged line.
Strong bank earnings helped the financial sector with XLF gaining +0.63%, but that was offset by tech stocks tanking, despite the widely anticipated IPO of Coinbase. The stock rallied at first but then most momentum and closed below its IPO price.
Added the chief strategist of TD Ameritrade:
The first wave of Q1 big bank results look pretty much as strong as most analysts had expected – even stronger actually, it’s possible that we’re in a powerful market that’s in a forgiving mood when it comes to bad news. The path of least resistance for stocks continues to seem to be to go higher, with the market climbing a wall of worries that just doesn’t go away.
On the economic front, we learned that soaring import and export price inflation has finally been noted with the Commodity ETF DBC rocketing +2.30%. None of this was addressed by Fed head Powell speaking before the Economic Club of Washington.
The US Dollar took a dive and approached a key support level, bond yields inched up a bit, and Gold gave back some of yesterday’s gains.
Another session where not much was gained or lost.
Despite a slow start, the S&P 500 and Nasdaq found some upward momentum late in the session and broke out of a sideways trend with the former scoring a new all-time high.
Anxiety about the Consumer Price Index (CPI) faded with the index rising in March by 0.6% vs. 0.5% expectations. YoY we saw a 2.6% increase, which also was a tad higher than expectations of 2.5%. Overall, traders were relieved that the outcome was not as bad as feared.
Also keeping a lid on prices early on was news that the rollout of Johnson & Johnson vaccine was halted, which kept trading activity on a subdued level. The reason for the pause were investigations of six reported cases of a rare and severe type of blood clot, the FDA stated.
The volatility index (VIX) continued to crawl sideways and has now closed below 20 for 10 straight days, something that has not happened since February 2020, according to ZH. Bonds were bid, meaning yields drifted lower, as did the US Dollar, which allowed gold to have a day with a green close and a gain of 0.74%.
Here’s another record that ZH pointed to, namely that the S&P 500 ETF (SPY) has now closed above its opening price for the 13th day in a row. Since the SPY’s inception in 1993, this has never happened before.
This makes me go “hmm.” Could market manipulation possibly have something to do with it?