China, Italy And Moody’s Spoil The Market Mood

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The market opened with a thud today, as investors dumped stocks amid a slew of bad news from around the world. China reported dismal trade data, showing a sharp drop in both imports and exports.

Italy slapped its banks with a surprise tax hike, sparking fears of a new debt crisis. And Moody’s downgraded the US banking sector, citing higher funding costs, regulatory capital issues and rising risks from commercial real estate loans.

Moody’s also warned of a looming recession in the US, saying that the banking sector will face tighter credit conditions and higher loan losses. So much for the Fed’s reassurance that the financial system is “resilient”. Maybe they should check their dictionaries for the meaning of that word.

The earnings season did not help either, as UPS missed its revenue target for the second quarter, sending its shares lower. The only bright spot was a late rally that trimmed some of the losses, thanks to some short covering and bargain hunting. The major indexes ended the day in the red, but not as deep as they were in the morning.

The bond market also saw some volatility, as the 10-year yield dipped below 4% at one point, before recovering slightly. The dollar gained strength against most currencies, while oil and gold prices retreated.

The AI corollary to the Covid/crypto boom is still alive, as this chart shows.

What’s next?

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Market Bounces Back On Earnings Strength, But VIX Looms Large

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The Dow led the way in a bullish day for the stock market, while the Nasdaq trailed behind but managed to end its 4-day losing streak.

Tesla was one of the laggards, dropping 2% amid a tech sell-off. The rally was fueled by strong earnings reports, as 80% of the S&P 500 companies that have reported so far beat Wall Street’s lowered expectations.

The market rebounded despite rising bond yields and Apple’s fifth consecutive day of losses, which shaved off 10% of its value since last week. This was its worst performance since November. Tyson Foods also had a rough day, but the market recovered some of its losses in the final hour thanks to bargain hunters.

The dollar was flat, while gold dipped and then recovered but still closed in the red.

Later this week, investors will pay attention to the consumer and producer prices indexes, which are key indicators of inflation and economic health. Both could move the market significantly depending on their outcomes.

In the meantime, traders should be aware of the seasonal pattern of the volatility index (VIX), which tends to spike in August. This chart shows how this could spell trouble for stocks, as higher volatility usually means lower prices.

Remember, when the VIX goes up, stocks go down.

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ETFs On The Cutline – Updated Through 08/04/2023

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 (240 vs. 192 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 August 4, 2023

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

Tech Split, Wage Spike, Market Dip, Oil Rip: A Mixed Bag for the Economy

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Tech giants Amazon and Apple had a split decision in their earnings reports yesterday. Amazon delivered a knockout, while Apple got knocked out. The result? A combined loss of about $30 billion in market value today. Ouch indeed!

Meanwhile, the job market showed some signs of cooling down, but not enough to ease the inflation fears. The payroll report for July missed the mark, but the average hourly wages beat expectations by rising 0.4%. That means workers are getting paid more, but also paying more for everything else.

ZeroHedge had a bleak take on the situation:

According to the headlines, the US added 187K jobs in July, and 268K more people found employment. But a closer look reveals that most of these jobs were part-time, low-paying gigs. In fact, the number of full-time workers dropped by a staggering 585K, while the number of people working multiple jobs rose by 118K. So much for the economic “miracle”!

The Babylon Bee added some humor to the mix: “White House says that the economy is so successful that the average American has twice as many jobs as he had two years ago.” Haha!

The stock market started off strong, but then hit a wall and crashed hard. The major indexes ended up in the red, with the S&P 500 sinking to its lowest level in three weeks.

The most shorted stocks continued their downward spiral, and the dollar rallied for the third week in a row, although it lost some steam today. Gold benefited from the dollar’s weakness and bounced back, but still finished the week lower.

Oil prices soared to their highest level since November, topping $82 per barrel. This is bad news for anyone who hopes that inflation is under control.

Why?

Because gas prices are going up too. And that brings us to the dreaded “S” word: Stagflation. That’s when you have no growth and high inflation. Not a good combination.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 08/03/2023

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, August 3, 2023

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 12/01/2022

Click on chart to enlarge

This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has now broken above its long-term trend line (red) by +4.99% and remains in “Buy” mode.

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Bond Yields Spook Stocks For Third Day; Earnings Disappoint

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The bond market was the bad guy today, as higher yields scared off stock buyers for the third day in a row. The 10-year yield jumped to 4.18%, the highest since last November, and the 30-year yield was close to its October peak.

This hurt real estate stocks, which fell more than 1%, and made the market more nervous, with volatility at its highest since June. Utilities also got a beating, losing 2.3%.

The stock market was due for a correction anyway, but rising rates could make it worse, as momentum has been fading lately. Some analysts think that the old pattern of “break, bounce, break again” will still hold, as long as there is some hope that the long-term trend is up.

On the earnings front, there were more misses than hits, with Qualcomm, PayPal, and Expedia all disappointing investors and seeing their shares drop.

Later today, we will hear from two of the biggest names in tech: Apple and Amazon. The dollar was steady, Crude Oil recovered some of its losses, while gold slipped a bit under the pressure of higher rates.

These higher 10-year yields are starting to weigh on the major indexes, especially the S&P 500, as this gap can’t last forever—and from this chart it looks like that the index will have to ‘catch down’ to the yield.

And that means trouble ahead.

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