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 (217 vs. 219 current).
STOCKS STAY RESILIENT AS MARKETS LOOK PAST GEOPOLITICAL NOISE
[Chart courtesy of MarketWatch.com]
Moving the market
Stocks took a breather early in the session following Thursday’s strong rally, but the major indexes still managed to grind their way to a modest gain by the close.
That keeps the S&P 500 on track for a nearly 1% gain this week, while the Nasdaq is pacing for a gain of more than 1%. The Dow has lagged somewhat, though it’s only modestly lower for the week.
Much of the recent strength has been fueled by easing concerns over the Middle East. Markets welcomed lower oil prices after reports that diplomatic efforts are underway to bring the U.S. and Iran back to the negotiating table.
Interestingly, traders have largely looked past the latest flare-up in tensions, suggesting that Wall Street remains more focused on economic fundamentals and corporate earnings than geopolitical headlines.
Technology stocks, particularly chipmakers, continue to provide leadership for the broader market. Optimism remains high that strong earnings growth and continued AI-related spending can support further gains and eventually broaden the rally beyond the tech sector.
One potential complication emerged from the latest inflation data. Core PCE inflation came in hotter than expected, with rising memory-chip prices playing a role.
That could make it harder for the Federal Reserve to justify near-term rate cuts, especially as surging data center demand continues to put upward pressure on certain technology-related costs.
Despite those concerns, the major indexes still closed slightly higher, while bond yields finished little changed.
In other markets, metals drifted modestly lower, although copper bucked the trend and finished in positive territory. Bitcoin also held firm, ending the day just shy of the $64,000 level.
Meanwhile, oil prices fell for a third straight session as traders appeared confident that the latest U.S.-Iran military tensions will remain short-lived.
That confidence seems somewhat at odds with President Trump’s recent statement that “the ceasefire is over,” highlighting the gap between geopolitical rhetoric and the market’s relatively calm outlook.
With stocks continuing to shrug off geopolitical risks and inflation concerns, will strong earnings momentum be enough to push the market to fresh highs?
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.
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.
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.
DOMESTIC EQUITY ETFs: BUY— effective 5/20/2025
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 +8.63% and remains in “Buy” mode, with our holdings being subject to our trailing sell stops.
Stocks moved higher right out of the gate, led by strength in semiconductor shares and aided by a pullback in oil prices, as traders looked past renewed tensions between the U.S. and Iran and focused on the broader market outlook.
According to U.S. Central Command, the U.S. conducted a second consecutive day of strikes against Iranian targets. The latest military action followed Tehran’s attacks on commercial shipping in and around the Strait of Hormuz, a key global trade route where traffic has already been disrupted.
Despite the escalating conflict, crude oil prices moved lower after President Trump indicated that Iran had reached out to negotiate a deal.
That marked a sharp shift in tone from recent comments, which included suggestions that negotiations may no longer be worthwhile and that the previous ceasefire arrangement between Washington and Tehran was effectively over following another round of attacks in the region.
For now, hopes for a quick return to normal export flows through the Persian Gulf appear increasingly uncertain. As a result, geopolitical risks remain elevated and could spark bouts of risk-off trading if tensions continue to escalate.
That said, the market’s attention remains firmly on earnings season and the ongoing AI-driven growth story.
Many traders believe those two factors could continue providing enough fuel to push equities higher, even in the face of geopolitical uncertainty.
Meanwhile, falling bond yields helped support stocks, while a weaker dollar boosted precious metals. Gold rebounded above $4,100, and bitcoin also caught a bid, climbing back toward the $63,000 level.
With investors seemingly shrugging off the latest military strikes and oil prices moving lower instead of higher, are the bulls showing remarkable resilience—or is the market becoming a little too comfortable with rising geopolitical risks?
Stocks came under pressure early in the session after President Trump told attendees at the NATO summit that the ceasefire with Iran was effectively over, reigniting concerns about escalating tensions in the Middle East.
The comments sent oil prices sharply higher and sparked a risk-off move across much of the market.
Adding to the unease, Trump later suggested that further military action against Iran could be imminent. His remarks came on the heels of what the U.S. described as a series of powerful strikes against Iranian targets in response to attacks on commercial vessels transiting the Strait of Hormuz.
As oil surged, energy stocks moved higher, while consumer-focused companies, which could be hurt by rising fuel costs, lagged. Chip stocks, meanwhile, found their footing after coming under pressure in the previous session.
The renewed geopolitical tensions disrupted what had become a fairly complacent market narrative. After weeks of optimism surrounding a potential de-escalation in the region, traders suddenly found themselves reevaluating geopolitical risks.
Despite the shaky backdrop, the Nasdaq managed to break away from the broader weakness and finish with a modest gain as dip-buyers stepped in to support the tech sector.
Elsewhere, bond yields moved higher as investors priced in the possibility that rising energy costs could reignite inflationary pressures and keep interest rates elevated for longer.
The dollar saw a round-trip session, while gold recovered from an early decline before closing slightly below the $4,100 level. Bitcoin, however, failed to participate in the tech rebound and ended the day lower.
For now, it appears that many traders have already moved past the Iran story, with several of the sectors and stocks most affected by the conflict fully reversing their initial reaction.
But if tensions continue to escalate, could the market be underestimating the risks ahead?
The Dow pulled back from record highs early on as traders once again rotated out of AI-related stocks and grappled with rising oil prices and higher bond yields.
The selling pressure was especially noticeable in the semiconductor space. Micron dropped 7%, while KLA, Marvell Technology, Broadcom, and AMD also moved lower. The VanEck Semiconductor ETF (SMH) lost more than 5%, highlighting the broad weakness across the chip sector.
Investor sentiment took another hit after reports that Iran attacked a Qatari liquefied natural gas tanker near the Strait of Hormuz. The escalation pushed energy prices higher, with Brent crude climbing more than 2% to trade above $73 a barrel.
The weakness in AI-related stocks actually started overseas. South Korea’s Kospi index tumbled nearly 5%, led by a sharp decline in Samsung Electronics. Despite reporting a strong jump in second-quarter profit, concerns about future spending and demand overshadowed the positive earnings news.
Adding to the uncertainty, reports surfaced that DeepSeek is developing its own AI chip. If successful, that move could reduce its reliance on suppliers such as Nvidia and Samsung, raising fresh concerns about future demand for some of the industry’s biggest chipmakers. Nvidia shares also finished lower on the day.
By the closing bell, markets were struggling to absorb a combination of rising oil prices, higher bond yields, and growing inflation expectations. The dollar spent much of the session drifting sideways before surging into the close.
That late-day dollar strength took much of the momentum out of an early gold rally, sending the precious metal back toward the $4,100 level.
Bitcoin experienced its own rollercoaster session, swinging between $62,500 and $64,500 before finishing little changed.
With geopolitical tensions in the Middle East heating up and traders facing a growing list of macroeconomic headwinds, the big question is whether the upcoming earnings season can provide enough fuel to keep the market’s longer-term uptrend intact.
