Following The Rumor

Ulli Market Commentary Contact

[Chart courtesy of]
  1. Moving the markets

If markets appear stuck and non-directional, simply start a bullish rumor to get things moving again. Such was the case today when the major indexes, after hovering tightly around their unchanged lines for most of the session (weak bank earnings), took off and headed higher.

The support came from a report alleging that the Trump administration was debating whether to “ease tariffs on Chinese imports” in order to ease tensions and calm markets in view of the ongoing partial government shutdown. The result was an instant spike in the major indexes (see chart above), which was faded as the rumor was denied, but the “rumor” idea worked, and we closed in the green.

The other highly anticipated news item was Netflix’s after hour earnings report. Leading up to it, the stock was pushed higher in part of yesterday’s announcement of an increase in subscription rates. After publishing their report card, the stock sank some 3% (as of this writing) due to the revenue missing expectations. It remains to be seen if there are any negative consequences for the Nasdaq tomorrow.

Bond yields popped and advanced with the 10-year making new highs for 2019. That came as a surprise, as there was no news supporting such a move. While we only reached the 2.75% level, any further moves towards 3% is bound to take some steam out of current bullishness. Is that why some analysts seem to think that we are due for a market correction starting next week?

  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 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 regarding 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 our original candidates from the last cycle have fared:

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 -8% point has been taken out in the “Off High” column. For more volatile sector ETFs, the trigger point is -10%.

  1. Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) advanced and moved closer to their respective trend lines.

Here’s how we closed 01/17/2019:

Domestic TTI: -3.42% below its M/A (last close -4.32%)—Sell signal effective 11/15/2018

International TTI: -4.00% below its M/A (last close -4.31%)—Sell signal effective 10/11/2018

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.

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