Walking Back The Tough Talk — Markets Stage Comeback

Ulli Market Commentary Leave a Comment

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

The White House walked back some of its tough talk last night by announcing that they are offering some temporary exceptions to export limitations against China’s Huawei Technologies. While the mudslinging continued, it was enough of a conciliatory gesture to soothe the anxiety among Wall Street traders, which had been focusing on pressing the sell buttons all day yesterday.

Dip buyers emerged and drove the major indexes to some solid gains, with especially the Nasdaq recouping some of yesterday’s sharp losses. Support also came from a short squeeze in SmallCaps, as this chart shows.

The fallout from yesterday’s threat by the Chinese to curtail the export of rare-earth minerals was immediate, as China’s rare earth holdings catapulted some 132% in a market that does not have upside/downside price limits.

On the domestic front, the news was not good, as existing home sales tumbled YoY for the 14th month. Expectations had called for a +2.7% rise in April, which was not even close, as reality showed a decline of -0.4%, which comes after a shocking -4.9% drop in March. At least for today, this “bad” news was good news, as the bullish market theme was not even interrupted to let this realism set in.

Let’s see if this comeback has legs, or if it is simply a “one-off” in a market that is predominantly headline driven.

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 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.

For this current domestic “Buy” cycle, here’s how some our candidates 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%.

3. Trend Tracking Indexes (TTIs)

Our Trend Tracking Indexes (TTIs) rebounded and jumped higher with the International one reclaiming its bullish trend line.

Here’s how we closed 05/21/2019:

Domestic TTI: +3.61% above its M/A (last close +2.50%)—Buy signal effective 02/13/2019

International TTI: +0.44% above its M/A (last close -0.11%)—Buy signal effective 02/21/2019

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 specified guidelines.

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