Markets Rebound Strongly, Tech Sector Leads Gains

Ulli Market Commentary Contact

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

Despite an early dip, the markets quickly rebounded, with major indexes closing in the green and keeping hopes of a Santa Claus rally alive.

This solid recovery followed last week’s turmoil, during which the Dow endured a 10-day losing streak and plummeted over 1,100 points on Wednesday. This drop was triggered by the Federal Reserve’s announcement that fewer rate cuts would be planned for 2025 than previously anticipated.

Early in the day, weak economic data dampened sentiment, as the Consumer Confidence Index for December fell to 104.7, its lowest level since September and below the expected 113.

However, even worsening Economic Surprise data and softening survey data couldn’t hold back the bulls. The rebound continued, despite the low liquidity typical of the pre-Christmas period.

The tech sector led the day’s gains, with heavyweights Tesla, Meta, and Nvidia each adding at least 2%. Bond yields rose, the dollar recovered from Friday’s losses, and gold moved in the opposite direction. Bitcoin remained steady over the weekend but declined in today’s session.

Tomorrow will be a shortened session on Wall Street, and I won’t be providing a market commentary. However, I will return on Thursday to close out the week with the usual reports.

Merry Christmas!

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ETFs On The Cutline – Updated Through 12/20/2024

Ulli ETFs on the Cutline Contact

Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.

The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (205 vs. 144 current).

Take a peek:

The HV ETF Master Cutline Report

If you are confused by some of the terms we use, don’t panic. I have a helpful Glossary of Terms for you.

If you want to learn more about the Cutline method and how it can make you rich (or at least less poor), read my original post here.

ETF Tracker Newsletter For December 20, 2024

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

MARKETS REBOUND AMID INFLATION DATA AND LOOMING GOVERNMENT SHUTDOWN

[Chart courtesy of MarketWatch.com]

  1. Moving the market

After a challenging week, during which the Dow plummeted by approximately 1,100 points in a single day, the major indexes managed to stabilize. They rebounded immediately after the opening and recovered some of the previous day’s losses.

This recovery was supported by the Fed’s preferred inflation measure, the Personal Consumption Expenditures (PCE) index, which increased by “only” 2.4% year-over-year. This figure was slightly lower than expected, which seemed to reassure traders about the Fed’s stance on further rate cuts amid persistent inflation.

Such faint hopes often drive the bulls on Wall Street, despite ongoing concerns about inflation, especially in the context of rising debt and deficits. Additionally, the issue of government funding remains unresolved, with a partial shutdown set to begin tonight if no agreement is reached.

The US Economic Surprise Index fell for the fifth consecutive week, as noted by ZH, with both “soft” and “hard” data showing weakness. This prompted Chicago Fed’s Goolsbee to remark, “I’ve been saying that the overall trend is that inflation is way down.”

A significant short squeeze provided a boost to equities, with Mega-Caps also recovering and returning to their unchanged levels for the week. Bond yields rose sharply, with the 10-year yield climbing for the second consecutive week, ending at 4.53%.

The dollar strengthened for the third week in a row, Bitcoin rebounded but had its worst week since September, and gold, although lower for the week, rallied nicely today.

With the midnight deadline rapidly approaching, the looming government shutdown remains a significant concern, making me ponder how the markets will react on Monday, should it occur.  

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 12/19/2024

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, December 19, 2024

How to use this StatSheet:

  1. Out of the 1,800+ ETFs out there, I only pick the ones that trade over $5 million per day (HV ETFs), so you don’t get stuck with a lemon that nobody wants to buy or sell.
  1. Trend Tracking Indexes (TTIs)

These are the main indicators that tell you when to buy or sell Domestic and International ETFs (section 1 and 2). They do that by comparing their position to their long-term M/A (Moving Average). If they cross above, and stay there, it’s a green light to buy. If they fall below, and keep going, it’s a red light to sell. And to make sure you don’t lose your shirt if things go south, I also use a 12% trailing stop loss on all positions in these categories.

  1. All other investment areas don’t have a TTI and should be traded based on the position of each ETF relative to its own trend line (%M/A). That’s why I call them “Selective Buy.” In other words, if an ETF goes above its own trend line, you can buy it. But don’t forget to use a trailing sell stop of 12%, or less if you’re feeling nervous.

If some of these words sound like Greek to you, please check out the Glossary of Terms and new subscriber information in section 9.

  1. DOMESTIC EQUITY ETFs: BUY— since 11/21/2023

Click on chart to enlarge

This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has broken above its long-term trend line (red) by +1.82% and is in “Buy” mode as posted.

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Bullish Sentiment Fades As Late Sell-Off Drags Indexes Down

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

This morning, traders were still grappling with Fed Chair Powell’s hawkish comments from yesterday, indicating that he is likely to cut interest rates only twice next year, down from the four reductions forecasted in September.

The pressing question now is: what will policymakers do in 2025? If inflation worsens, as I believe it will, they may have to refrain from cutting rates altogether and possibly reverse course.

Despite this uncertainty, bullish sentiment and bargain hunters lifted the indexes out of their slump, with all three major indexes starting the session on a positive note. However, a late-day sell-off dragged the S&P 500 and Nasdaq back into the red, while the Dow managed to eke out a small gain.

The latest data releases presented a mixed picture. The final revision to Q3 GDP was strong, jobless claims were solid, and existing home sales improved. However, manufacturing continued to decline. In summary, soft data was trending downward, while hard data remained flat.

Mega Tech stocks experienced a volatile session, bond yields surged, the dollar reached two-year highs, and Bitcoin fell below the $100k mark. Gold slipped below $2,600 but rebounded to close positively.

Additionally, U.S. sovereign risk of default is rising again, as highlighted by ZH, due to the potential government shutdown tomorrow night.

Will cooler heads prevail?

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Market Carnage: Stocks Plunge, Bond Yields Surge After Fed’s Hawkish Comments

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

The major indexes edged higher ahead of the Federal Reserve’s interest rate announcement, with the Dow leading the way despite its recent worst performance in 46 years.

Although the index is less than 4% below its all-time high, a shift from “old economy” shares to the tech sector pulled the Dow down. This decline was exacerbated by the Dow’s underweighting of technology stocks.

The Fed’s announcement of a 0.25% rate cut, which was expected to please the markets, had the opposite effect.

Fed Chair Powell’s comments about moving cautiously and seeking progress on inflation contradicted market trends, as inflation has been rising alongside strong economic data since the rate-cut cycle began. Powell’s belief that inflation is transitory or that disinflation is occurring seems to be at odds with market realities.

Traders reacted negatively to the Fed’s hawkish statement, causing rate cut expectations for 2025 to plummet and leading to a market-wide collapse.

The most shorted stocks were dumped, Mega Cap stocks plunged, market breadth worsened, gold fell below its 100-day moving average, and Bitcoin approached its $100k mark but managed to hold steady for now.

Bond yields surged, with the 10-year yield reclaiming its 4.50% level, while the dollar was the only asset class to benefit, rising to its highest level since September 2022.

Our Trend Tracking Indexes (TTIs) also declined but remain above their respective trend lines for now. If this trend reversal continues, we may soon enter “Sell” mode and move back into the safety of our money market accounts.

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