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 (144 vs. 111 current).
EQUITIES FALL AS STRONG JOBS REPORT DIMS RATE CUT HOPES
[Chart courtesy of MarketWatch.com]
Moving the market
This morning, equities took a hit as the latest economic reports dampened traders’ expectations for further rate cuts in 2025. The jobs report revealed that U.S. payrolls grew by 256,000 in December, significantly surpassing the expected 155,000. Additionally, the unemployment rate fell to 4.1%, contrary to projections that it would remain steady at 4.2%.
Throughout 2024, we saw similar scenarios where initial gains were later revised down, resulting in disappointment. While I anticipate a similar outcome this time, the current data is undeniably market moving.
Consequently, bond yields spiked to their highest levels since late 2023, with the 10-year yield ending at 4.77%. The probability that the Federal Reserve will hold rates steady at their upcoming meeting is now at 97%. As usual, good economic news translates to bad news for the markets.
Despite the current rebound in macro data and rising inflation fears, traders believe that the labor market will weaken in the coming quarters, potentially forcing the Fed to soften its policy with further rate cuts.
The major indexes lost about 2% for the week, with Small Caps, which are most sensitive to interest rates, faring the worst. Leading the decline was the China Index, which has now tumbled over 20% from its recent high, entering bear market territory.
The dollar continued its gains, and despite its strength, gold surged and crossed the $2,700 level again. Bitcoin experienced a volatile week, storming higher overnight but ending lower after crossing $100,000 last Monday.
Crude oil had a strong week in terms of price, aided by additional Russian sanctions and colder temperatures. However, higher pump prices are likely to follow, further increasing inflation expectations.
Given all these developments, I ponder: Why has the Fed been lowering rates? Ah yes because inflation is supposedly transitory…
ETF Data updated through Wednesday, January 8, 2025
How to use this StatSheet:
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.
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.
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.
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 +2.61% and is in “Buy” mode as posted.
The markets continued to face challenges following significant declines in big tech stocks during the previous session. Traders are primarily concerned about the trajectory of interest rate cuts, which are crucial for maintaining the bullish cycle.
Adding to the negative sentiment were reports indicating that private sector job creation in December fell more than expected, while wages grew at the slowest pace since July 2021. To me, these data points suggest a struggling consumer, especially when considering the record levels of credit card debt.
This morning, rising bond yields, driven by concerns that inflation is not under control, were also a worry. However, an early spike in the 10-year yield to 4.73% quickly reversed.
Ultimately, dip buyers stepped in, lifting the Dow and S&P 500 out of the red and into a moderately positive close. The Nasdaq nearly broke even, while Small Caps lagged.
Crude oil suffered its largest drop in a month after rising in six of the last seven days. The dollar ended the session higher, but this did not negatively impact gold, which gained 0.54%.
Bitcoin continued its downward trend following yesterday’s stumble but found support at the $93,000 level.
With the markets closed tomorrow, I will return on Friday with the week-ending commentary.
This morning, the markets experienced a significant downturn, with the Nasdaq leading the decline. Bond yields spiked, with the 10-year yield rising by 6 basis points to 4.70%, its highest level since April 2024.
This spike was driven by the ISM Services Inflation Index, which surged to nearly two-year highs, casting doubt on the Federal Reserve’s willingness to further cut rates. Inflation expectations have now reached their highest point since February 2023, as noted by ZH.
The tech sector faced additional pressure, with Nvidia shares dropping nearly 6% and failing to recover from their worst losses of the day.
Additionally, Bank of America downgraded Tesla, causing its shares to slip by approximately 4.5%. This downgrade had a ripple effect, leading other mega-cap tech companies lower, along with Bitcoin, which fell below the $100,000 mark once again.
In contrast, gold managed to buck the trend, gaining 0.65% amid a moderate comeback rally in the dollar.
A press conference held by President-elect Trump generated a slew of headlines, ultimately pushing the volatility index higher and driving equities across the board lower. ZH compiled the following notable headlines:
-*Trump to announce $20B investment for new data centers: CNBC
– *Trump: Interest rates are far too high
– *Trump reiterates he’ll reverse Biden offshore drilling ban
– *Trump: Something will have to be done with Canada, Mexico trade
– *Trump: Will change name of Gulf of Mexico to Gulf of America
– *Trump threatens Denmark with tariffs over Greenland
– *Trump refuses to rule out economic, military tools for Panama
– *Trump: I want to see debt ceiling extension
In the end, bonds sold off as yields surged, creating a significant divergence between equities and the rising 10-year yield.
This raises the question: How long can this divergence persist before the market corrects itself?
If it does, will equities head south, or will yields soften considerably?
The markets opened on a positive note following last week’s pullback. The chip sector played a significant role in driving stocks higher, with Nvidia gaining nearly 5% early on, while Broadcom and Micron added 2.9% and 9%, respectively.
Early bullish sentiment was further supported by a Washington Post report suggesting that Trump’s tariff plan would be “narrower” than expected, targeting only critical imports. This marked a shift from campaign promises of “universal” tariffs in the 10%-20% range. However, this report turned out to be false, and the dollar recovered somewhat from an early sell-off.
Despite this, automakers advanced as fears of a global trade war eased. Traders are now keen to see how the markets perform during the first five trading days of the year, a period historically seen as an indicator of the year’s overall market direction.
While the Dow lost its early momentum and closed roughly unchanged, the S&P 500 and Nasdaq managed to close in the green. However, the negative breadth, with more declining stocks than advancing ones, indicates underlying weakness, as only a small number of S&P members contributed to the upswing.
The Mega-Cap tech sector reached new record highs today but faded by the end of the session. Gold struggled to find support after an early drop and failed to close in the green.
Meanwhile, Bitcoin surged, peaking at $102,000, its highest level in three weeks. With the incoming administration being extremely Bitcoin-friendly, a new all-time high could be on the horizon.
