Market Wavers Amid Seasonal Softness And CPI Anticipation

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

Today, the traditional seasonal softness of mid-December persisted, with major indexes fluctuating without clear direction and ultimately closing in the red, despite a surge in small business optimism.

An early rally in the Mega-Tech sector hit a ceiling, reversed, and erased initial gains, making the Nasdaq the biggest loser of the day. Additionally, the most shorted stocks fell again, wiping out last Friday’s advances.

Bond yields climbed, and the dollar rallied for the third consecutive day. Bitcoin tumbled but managed to bounce off yesterday’s lows, while gold maintained its upward momentum, reclaiming the $2,700 level.

Traders are now focused on tomorrow’s CPI report, which could significantly influence the Federal Reserve’s interest rate policy at its December 17-18 meeting.

Expectations are for a headline inflation increase of +0.3% for November and +2.7% over the past 12 months. Any softening of the CPI data could revive equity bulls, while worsening inflation data would give bears the upper hand.

Which outcome will we see?

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Equities Decline Ahead Of Key Inflation Data; Gold Advances

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
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Equities declined ahead of key inflation data expected later this week, causing the major indexes to slip into the red.

However, gold defied the trend with a solid advance. Nvidia and Advanced Micro Devices faced pressure, with Nvidia dropping nearly 3% and Bank of America downgrading AMD from a “buy” to a “neutral” rating.

Last week’s gains in the S&P 500 and Nasdaq were driven by the November jobs report, which showed stronger-than-expected growth. This moderate growth has kept traders hopeful that the Federal Reserve will lower interest rates later this month, with current odds at 88%.

China’s economic stimulus measures boosted their markets, while momentum in the U.S. markets turned bearish. Despite this, the Mega Cap Tech sector held steady for the second consecutive day.

Bond yields edged higher, and Bitcoin briefly surpassed $100,000 before losing momentum and finding support at $96,500. Gold experienced a notable rise, and the dollar advanced after an initial dip.

Despite Bitcoin’s correction, it continues to follow global liquidity trends with a slight lag. The following chart suggests potential upside towards the $125,000 level before a larger correction might occur:

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ETFs On The Cutline – Updated Through 12/06/2024

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 (211 vs. 252 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 6, 2024

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

SEASONAL TRENDS HINT AT POTENTIAL MARKET DOWNTURN NEXT WEEK

[Chart courtesy of MarketWatch.com]

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Traders viewed today’s jobs report as a “Goldilocks” scenario, where the data was better than expected but not so strong as to discourage the Federal Reserve from potentially cutting interest rates later this month. This morning, the odds of a rate cut increased to 88%.

In November, nonfarm payrolls rose by 227,000, surpassing the expected 214,000 and significantly improving from October’s modest gain of just 12,000. The unemployment rate edged up to 4.2%, aligning with current projections.

While this headline number impacts markets, it is likely to be revised, as has been the trend over the past year. Nevertheless, major indexes surged on the news, with the Nasdaq leading the charge and achieving a record close, while the Mega-Cap basket continued to gain.

Throughout the week, economic data generally fell short of expectations, which bolstered hopes for a rate cut. This dovish sentiment extended to the bond markets, where all yields declined over the week.

Bitcoin underwent its sixth consecutive week of gains, briefly surpassing the $100,000 mark for the first time before retreating to find support at $92,000, eventually rebounding to $102,000.

The dollar ended the week higher, while gold followed a similar trajectory but closed slightly lower.

Given the influence of seasonality on equities, we might see a downturn next week if historical patterns hold true.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 12/05/2024

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, December 5, 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 +9.02% and is in “Buy” mode as posted.

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Bitcoin Breaks $100k, Settles Below $98k In Volatile Session

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

After yesterday’s strong gains, the markets took a breather today, with major indexes closing moderately lower. Small Caps suffered the most significant losses.

Last night, the much-anticipated event occurred when Bitcoin pierced the $100k level for the first time. Within minutes, it surged to $104k before leveling off slightly below that mark. During today’s session, Bitcoin slipped and settled around $98k.

Historically, such bullishness in Bitcoin has positively impacted the Nasdaq, but so far, the tech index has not reacted.

The latest first-time filings for jobless benefits rose by 9,000 to 224,000, higher than the estimated 215,000. On a positive note, continuous claims edged lower by 25,000 to 1.871 million.

Despite flat bond yields and a declining dollar, gold struggled to find footing and dropped by 0.82%. However, the Mega-Cap basket defied the overall market weakness and inched higher.

It was a quiet, directionless session ahead of tomorrow’s jobs report, an event that has the potential to catch traders off guard.

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