Chopping And Flopping

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

A roller coaster ride best describes today’s session with the markets homing in on every stimulus word uttered, then jumping on hopeful comments while slipping on disappointing news. Nothing else seemed to matter.

Goldman Sachs economist Alec Phillips noted that “the biggest issues remain unresolved and a deal doesn’t seem particularly close.”

“With big differences and little time, it seems unlikely that Pelosi and Mnuchin will reach a deal before the election. More importantly, even if a deal in principle is announced in coming days — this seems possible, but not likely — it looks very unlikely that it would pass before Election Day,” he added.

In the end, the major indexes dropped moderately, but gold stood out and solidified its position above the much fought for $1,900 level.

Other areas of the market were more active, as the US dollar was dumped to a level last seen on September 1st, while US bond yields rose for the 5th day in a row, as Bloomberg shows in this chart.

Added ZH:

Markets are currently not just pricing in an increase in volatility around Election Day, but also a sustained high-volatility environment thereafter – both in the post-election period and in the long run. Does that sound like an environment to be buying every dip at record highs?

That is exactly why we have reduced our exposure, since sharply increasing volatility on and after election day can wreak havoc with market sentiment.

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No Market Commentary

Ulli Uncategorized Contact

Due to a variety of business commitments I will not be able to write today’s commentary. Regular posting will resume tomorrow.

Ulli…

Markets Dump On Vanishing Stimulus Hopes

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

An early 100-point bounce in the Dow turned into a late trounce again with the major indexes accelerating to the downside late in the session. With only 1 day left until a key deadline for an aid package set by Pelosi becomes effective, traders took the lack progress as a bad omen and selling sped up.

Added CNBC:

Tom Block, Washington policy strategist at Fundstrat Global Advisors, thinks it is possible that a deal between the Trump administration and Pelosi can be reached.

“Both sides seem to have an incentive to get a deal done,” Block said in a note to clients. He also added that “the dynamics of the lame duck could be poisonous if Trump loses, or Republicans lose control of the Senate. The safer course of action seems to be to pass a bill now, and if there is a blue wave more stimulus early in 2021.”

While the Dow and the S&P 500 had their worst day since September 23rd, the Nasdaq logged its first 5-day losing streak since August.

Even though Pelosi and Mnushin were scheduled to talk later today, any potential deal was “not sounding imminent,” according to the Washington Post. However, should the warring parties suddenly come to an agreement, a relief rally would be a foregone conclusion; however, the duration of such would be questionable.

That also brings up the question, as to whether the big tech unwind, charted here by ZH, can be reversed, or not. How about the sliding FANG stocks? Or the skidding banking sector?

More questions than answers…

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ETFs On The Cutline – Updated Through 10/16/2020

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 264 (last week 265) 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 October 16, 2020

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

DIVING INTO THE WEEKEND

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

An early rally hit the skids with the major indexes diving into the close with only the Dow showing a small gain of +0.39%. The Nasdaq fared the worst by giving back -0.36%, but for the week, equities eked out a small profit.

Helping the Dow snap a 3-day losing streak was a report showing that US Core Retail Sales surged by the most in history, according to ZH. After two straight months of disappointments, September turned out to be the shining star by showing a rise of 1.9% MoM vs. expectations of a meager 0.8%. This translates into a stunning YoY 9.1%, which was the greatest rise ever.

Of course, all that occurred with government handouts in full swing, so we need to see what happens in October, when those “assists” came to an end…

“The economy continues to show pockets of strength, but those pockets need to widen,” said Quincy Krosby, chief market strategist at Prudential Financial. “For those who still have their jobs, the economy has been healing.”

“The question is, if initial unemployment claims continue to rise, will we continue to see retail sales surprising to the upside,” Krosby added.

Regarding the stimulus saga, the signals continue to be mixed with no commitment in sight from either warring party. Although Treasury Secretary Mnuchin indicated that the White House will not derail the stimulus talks with the opposition.

While yesterday’s short squeeze continued early in the session, it lost steam late in the day thereby causing the sell-off during the last hour.

This coming Monday, October 19, marks the 33rd anniversary of the 1987 Black Monday market crash. The analog to the 1987 event is pretty much intact, as you can see in Bloomberg’s chart:

I am not forecasting that we will see a repeat, but you must admit that the similarities leading up to the “event” are striking.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 10/15/2020

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, October 15, 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 +10.88% and remains in “BUY” mode as posted.

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