Strong Start To Weak Season: Can Market Momentum Continue?

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

The markets showed little activity early on, with the S&P 500 trading near its highs and eventually closing at a new all-time high.

Some tech stocks, including Intel, Nvidia, and Microsoft, posted gains, with Intel leading the pack and achieving its largest two-week increase on record. Meanwhile, Meta’s 20-day win streak came to an end, causing the mega-cap sector to retreat.

After a winning week, with the Nasdaq advancing 2.6% and the S&P 500 up 1.5%, a pause may be in order. The bullish trend was supported by Trump’s announcement on Thursday about reciprocal tariffs, which were less stringent than feared.

The markets have been in a consolidation period since early December, with a potential breakout likely influenced by the latest news from Washington, which remains unpredictable.

The most shorted stocks declined, while gold surged towards the $3,000 level. In contrast, Bitcoin hit a near three-week low, and oil prices continued their rebound from Friday.

Bond yields increased, reversing the previous day’s decline and lowering expectations for a 2025 rate cut.

Despite being in the seasonally weakest period of the year, today was a strong start. Can this momentum be maintained, or will historical precedent prevail?

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ETFs On The Cutline – Updated Through 02/14/2025

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 (182 vs. 215 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 February 14, 2025

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

STOCKS, BITCOIN, AND GOLD RISE DESPITE INFLATION CONCERNS

[Chart courtesy of MarketWatch.com]

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The major indexes paused early on as traders digested this week’s gains, most of which were generated yesterday.

President Trump’s memorandum outlining a plan for reciprocal tariffs on goods from countries with duties on U.S. products boosted sentiment for equities. The delayed implementation of these tariffs provided additional optimism. The tech sector benefited the most, with the Nasdaq leading the charge for the week.

Traders were also relieved that the CPI and PPI reports, although hotter than expected, suggest a softer upcoming reading for the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge.

However, concerns about stagflation—rising inflation coupled with lower growth—resurfaced as core retail sales and manufacturing activity for January both declined, contrary to expectations.

Despite these mixed signals, the week ended positively with stocks, Bitcoin, and gold moving higher, although gold faced some pressure today. Bond yields and the dollar were lower as rate-cut expectations rebounded.

The mega-cap tech sector broke out of its trading range, partly due to Meta’s impressive 20th consecutive up day, the longest winning streak for any Nasdaq stock ever, as noted by ZH. The most shorted stocks were squeezed all week, adding to the bullish market sentiment.

With inflation rearing its ugly head again, will we see a repeat of the 1970s, or will this time be different?

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 02/13/2025

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ETF Data updated through Thursday, February 13, 2025

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 +4.33% and is in “Buy” mode as posted.

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Equities Climb As Traders Bet On Softer PCE Amid Trade Tensions

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

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Following yesterday’s hotter-than-expected Consumer Price Index (CPI) report, today’s Producer Price Index (PPI) numbers also exceeded expectations. The January PPI showed a 0.4% increase, surpassing the consensus of 0.3%. The core PPI, which excludes food and energy, rose by 0.3%, aligning with estimates.

Despite these increases, traders pushed equities higher, reasoning that these latest figures suggest a softer Personal Consumption Expenditures (PCE) price index than feared. The PCE, closely monitored by the Federal Reserve, is set to be updated tomorrow.

Global trade tensions remain a focal point as Trump announced reciprocal tariffs on imported goods from any country that imposes duties on U.S. imports. With India being a significant offender, this will make for an interesting meeting when Trump meets with India’s Prime Minister Modi.

In the end, bond yields tumbled, helping equities to rally, with the Mega-cap sector participating. However, U.S. Defense stocks declined following Trump’s comments about halving the defense budget.

The most shorted stocks rallied, supporting bullish sentiment, alongside the semiconductor sector. The dollar closed at a three-week low, which helped gold to bounce back.

Bitcoin slid but found support at $96,000, while crude oil experienced volatility but closed relatively unchanged.

After a choppy week, traders are eagerly anticipating tomorrow’s PCE release, which is expected to come in better than anticipated, potentially pushing bond yields lower and equity prices higher.

Will they be right?

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Fed’s Stance On Inflation Confirmed As CPI Surpasses Expectations

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

The much-anticipated Consumer Price Index (CPI) report confirmed to me that the Federal Reserve’s decision to delay rate cuts was an acknowledgment that inflation remains a persistent issue.

In January, the CPI rose by 0.5% for the month, pushing the annual inflation rate to 3%, surpassing expectations of 0.3% and 2.9%, respectively. The core CPI, which excludes food and energy prices, increased by 0.45% for the month and 3.26% over the past 12 months, also exceeding forecasts.

As a result, the 10-year bond yield surged by over 12 basis points to 4.66% early in the session, dampening expectations for rate cuts in 2025. With the CPI rising for seven consecutive months, can it still be considered transitory?

Equities experienced a sharp decline early on, with several mega-cap stocks such as Amazon, Microsoft, and Alphabet falling. Consumer and bank stocks also slid due to concerns over reduced spending and a slowing economy. However, the Nasdaq managed to recover to its starting point.

On a positive note, Meta has rallied now for 18 consecutive days, marking the longest winning streak of any Nasdaq stock ever, as highlighted by ZH. During this period, the company has added $300 billion to its market cap.

The dollar spiked early in the session but lost all gains by the end, while Bitcoin initially dropped but then rallied back above its $97,000 level. Gold followed a similar pattern, with its ETF eking out a small gain.

As we reach the second half of February, a period that is typically weak seasonally, could this time be different?

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