- Moving the Markets
It seemed like forever, but it’s been only 28 days of treading water before upward momentum was sufficient enough to conquer the 20k milestone. Looking back to the 800 plus point drop in the Dow during election night, which appeared to signal a return to bear market territory, it’s been a truly remarkable recovery off the lows resulting in a 10% gain.
Keep in mind, however, that the Dow only represents 30 companies, of which only 6 stocks, namely GS, BA, IBM, UNH, HD and JPM, were responsible for 50% of the gains. Just as noteworthy is the fact that GS alone accounted for 21% of the Dow’s increase.
Interest rates rose with the 10-year Treasury yield now settling at 2.53%. Recall that several top bond managers forecast a negative effect on equities should the yield settle within the 2.6% to 3% area. As yields rose today, bonds got clobbered with the widely held TLT giving back -1.26% for the day.
The dollar weakened again, which should have been positive for gold but wasn’t today, as the yellow metal lost -0.90%. President Trump, along with others, has called the dollar overvalued and, as if on command, it’s been sliding all year. Here is the updated chart along with the divergence to the S&P 500:
Please note that the dollar (UUP) has disconnected from the S&P 500 (SPY) for most of this year. This will not go on forever as this pair usually moves in sync. So, the open ended question is: Will the dollar move back up or will the S&P move down?
- ETFs in the Spotlight (updated for 2017)
In case you missed the announcement and description of this section, you can read it here again.
It features 10 broadly diversified and sector ETFs from my HighVolume list as posted every Saturday. 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.
The below 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 2017 candidates have fared so far:
Again, the %M/A column above shows the position of the various ETFs in relation to their respective long term trend lines, while the trailing sell stops are being tracked 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.
- Trend Tracking Indexes (TTIs)
Our Trend Tracking Indexes (TTIs) headed further into bullish territory as President Trump’s economic action package resonated well with traders.
Here’s how we closed 1/25/2017:
Domestic TTI: +1.92% (last close +1.76%)—Buy signal effective 4/4/2016
International TTI: +5.25% (last close +4.62%)—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.Contact Ulli