Rally Loses Steam As The Drive For Dow 20,000 Stalls

Ulli Market Commentary Contact


[Chart courtesy of MarketWatch.com]
  1. Moving the Market

A broad decline in the major indexes interrupted the Trump rally as bad news was, for a change, perceived to be really bad news with the culprit being a drop in home sales. It was a sharp one as pending home sales plunged to their lowest level in almost a year. This should come as no surprise as the upswing in mortgage rates and not enough housing inventory kept potential buyers subdued.

If you look at the numbers on a year over year basis, the drop was the worst since August 2014 with only the Northeast seeing pending sales gains on both, an annual and monthly basis. NAR’s chief economist Lawrence Yun put it this way: “Already faced with minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”

Expect much more pain for housing, which as Mark Hanson noted recently is the least affordable it has ever been for buyers who need a mortgage in the coming months, which will promptly spill over into all other areas of the economy. In the meantime, the eagerly awaited Dow 20,000 remains out of reach.

  1. 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 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.

  1. Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) headed south as a poor reading on pending home sales took the momentum out of this rally.

Here’s how we closed 12/28/2016:

Domestic TTI: +1.08% (last close +1.32%)—Buy signal effective 4/4/2016

International TTI: +1.79% (last close +2.22%)—Buy signal effective 7/19/2016

Disclosure: I am obliged to inform you that I, as well as my advisory clients, own some of the ETFs listed in the above table. 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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