Major Indexes End In The Red Zone; A Good Day For Netflix

Ulli Market Commentary Contact

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1. Moving The Markets

U.S. equities closed in the red zone today amid sub-par economic data from China. Microsoft and Starbucks experienced notable gains (after hours) after releasing favorable updated company earnings data.

One of Thursday’s largest gainers was Netflix Inc. (NFLX). The stock gained 16% (from $333 to $388) on the day after releasing internal data on the company’s projected customer growth. Netflix’s CEO is also rumored to be testing new pricing strategies that would essentially charge customers more if they want to share their account with others. The rumored pricing change would increase revenue and profits, which was a bullish sentiment for the stock as it traded today.

China was back in the news today as word spread that the country’s manufacturing sector will experience an unanticipated contraction for the month of January. However, many investors are somewhat reluctant to read too deeply into the number, given that the Chinese spring festival (i.e. lunar New Year) is just around the corner. If you are not familiar with China’s spring festival, the country literally shuts down business operations for a 10-day period while tens of millions of people travel back home to celebrate with their families. For example, Beijing, a city with population of roughly 20 million, normally sees about 40% of its inhabitants exit the city during the holiday.

Our 10 ETFs in the Spotlight slipped along with the indexes but remain on the bullish side of the trend line:

2. ETFs in the Spotlight

In case you missed the announcement and description of this section, you can read it here again.

It features 10 broadly diversified ETFs from my HighVolume list as posted every Monday. Furthermore, they are screened for the lowest MaxDD% number meaning they have been showing better resistance to temporary sell offs than all others over the past year.

In other words, none of them ever triggered their 7.5% sell stop level during this time period, which included a variety of severe market pullbacks but no move into outright bear market territory.

Here are the 10 candidates:


All of them are in “buy” mode meaning their prices are above their respective long term trend lines by the percentage indicated (%M/A).

Now let’s look at the MaxDD% column and review the ETF with the lowest drawdown as an example. As you can see, that would be XLY with the lowest MaxDD% number of -5.73%, which occurred on 11/15/2012.

The sell off in the month of June 2013 did not affect XLY at all as its “worst” MaxDD% of -5.73% still stands since the November 2012 sell off.

A quick glance at the last column showing the date of occurrences confirms that five of these ETFs had their worst drawdown in November 2012, while the other five were affected by the June 2013 swoon, however, none of them dipped below their -7.5% sell stop.

Year to date, here’s how the above candidates have fared so far:


3. Domestic Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) stumbled today but remain above their long-term trend lines by the following percentages:

Domestic TTI: +3.90% (last close +4.16%)

International TTI: +6.74% (last close +7.19%)


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