Bearish Momentum Accelerates

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of]

1. Moving the Markets

Stocks tumbled, for the 5th day in a row, to kick off the new week in the red, as Wall Street reacted to fresh data showing China’s economy is in slowdown mode, overshadowing a big deal in the hard-hit energy patch. Blue chips comprising the Dow temporarily ducked below 16,000 at one point, the first time the index has fallen below that mark since Aug. 25.

The latest hit to investor sentiment was a continued drop in Chinese Industrial profits, which fell 8.8% in August vs. the same period a year ago. This is just the latest data point out of the world’s second-biggest economy that suggests economic softening. Also adding to the market’s angst is a 20% plunge in shares of global commodity giant Glencore.

U.S. investors got some good news on the economic data front today, with August consumer spending rising 0.4% and personal income up 0.3%.

The discussion about whether an official bear market is coming has picked up in the financial press, but in this corner we’ve identified it as of 8/21/15 and 8/24/15 respectively, at which time we went to 100% cash. So far, it’s been the right move, and odds are high that things could get a lot worse. Of course, dead cat bounces are always part of hovering on the bearish side of the trend line, so I’d expect to seem some along the way.

As far as resistance levels for the S&P 500 is concerned, 1,862 is the one to watch. If that one does not hold, very likely we’ll be slipping towards the 1,820s.

None of our 10 ETFs in the Spotlight showed any resistance to the continued sell-off with our favorite holding of the past 2 years now turning into a big loser, namely Healthcare (XLV), which got spanked at the tune of -3.87%; just for the day. It simply goes to show you the value of a sell-stop discipline, as all high fliers will eventually correct and usually at a faster rate than they went up.

Holding up the best in today’s slide were Consumer Staples (XLP), which only gave back -1.50%.

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.

Here are the 10 candidates:


The above table simply demonstrates the magnitude with which some of the ETFs are fluctuating in regards to their positions above or below their respective individual trend lines (%M/A). A break below, represented by a negative number, shows weakness, while a break above, represented by a positive percentage, shows strength.

For hundreds of ETF/Mutual fund choices, be sure to reference Thursday’s StatSheet.

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


Again, the first table above shows the position of the various ETFs in relation to their respective long term trend lines (%M/A), while the second one tracks their trailing sell stops in the “Off High” column. The “Action” column will signal a “Sell” once the -7.5% point has been taken out in the “Off High” column.

3. Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) started the week by plunging further as the bears were clearly in charge.

Here’s how we closed:

Domestic TTI: -3.61% (last close -2.49%)—Sell signal effective 8/24/2015

International TTI: -9.74% (last close -7.56%)—Sell signal effective 8/21/2015

Until the respective trend lines get clearly broken to the upside, we are staying on the sidelines.

Disclosure: I am obliged to inform you that I, as well as advisory clients of mine, own some of these listed ETFs. Furthermore, they do not represent a specific investment recommendation for you, they merely show which ETFs from the universe I track are falling within the guidelines specified.

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