ETF Tracker Newsletter For September 11, 2020

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  1. Moving the markets

An early bounce was not enough to restore the bullish momentum, as the Nasdaq bobbed and weaved throughout the session, closing in the red and ending its worst week since March with a loss of -4.2%.

The Dow and S&P 500 whipsawed as well but managed to eke out green closes but, for the week, the latter slipped by some -2.5% while the former now shows a -3% performance YTD.

“Markets continue to struggle finding an equilibrium,” said Mark Hackett, chief of investment research at Nationwide. “This market is more akin to the emotional swings of March and April than in recent months. We are likely to continue in a period of directionless volatility as bulls and bears wrestle between the strong Fed liquidity and improving economic backdrop and the continued uncertainty and elevated valuations.”

I agree with that, but I also think that the next few sessions will be critical with bulls and bears continuing their tug-of-war with the bulls looking for signs of support, as the major indexes head towards their respective 50 day M/As. If that support is violated, we may see an acceleration of downward momentum.

Added ZH:

In fact, FANGMAN (Facebook, Apple, Netflix, Google, Microsoft, Amazon, Nvidia) has lost over $1tn in market cap this week and still accounts for over 25% of the total market value of all S&P 500 comps.

On the economic front, the Labor Department reported that the consumer price index rose 0.4% in August vs. expectations of 0.3%. Contributing to this rise was a spike in used car and furniture prices, while rent inflation slowed.

The divergence between the Nasdaq and the 10-year yield, while having narrowed, is still extremely wide, and it will take a correction of gigantic proportions to restore synchronicity again.  

2. ETFs in the Spotlight

In case you missed the announcement and description of this section, you can read it here again.

It features some of the 10 broadly diversified domestic 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 these ETFs are fluctuating 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:

Click image to enlarge

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 TTIs recovered from yesterday’s pullback and remain of the bullish side of their respective trend lines.

This is how we closed 09/11/2020:

Domestic TTI: +5.61% above its M/A (prior close +4.98%)—Buy signal effective 07/22/2020

International TTI: +5.04% above its M/A (prior close +4.54%)—Buy signal effective 07/22/2020

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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