ETF Tracker Newsletter For September 11, 2020

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

NASDAQ ENDS ITS WORST WEEK SINCE MARCH

[Chart courtesy of MarketWatch.com]

  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.  

Read More

Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 09/10/2020

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, September 10, 2020

Methodology/Use of this StatSheet:

1. From the universe of over 1,800 ETFs, I have selected only those with a trading volume of over $5 million per day (HV ETFs), so that liquidity and a small bid/ask spread are assured.

2. Trend Tracking Indexes (TTIs)

Buy or Sell decisions for Domestic and International ETFs (section 1 and 2), are made based on the respective TTI and its position either above or below its long-term M/A (Moving Average). A crossing of the trend line from below accompanied by some staying power above constitutes a “Buy” signal. Conversely, a clear break below the line constitutes a “Sell” signal. Additionally, I use a 7.5% trailing stop loss on all positions in these categories to control downside risk.

3. All other investment arenas do not have a TTI and should be traded based on  the position of the individual ETF relative to its own respective trend line (%M/A). That’s why those signals are referred to as a “Selective Buy.” In other words, if an ETF crosses its own trendline to the upside, a “Buy” signal is generated. Since these areas tend to be more volatile, I recommend a wider trailing sell stop of 7.5% -10% depending on your risk tolerance.

If you are unfamiliar with some of the terminology, please see Glossary of Terms and new subscriber information in section 9.     

1. DOMESTIC EQUITY ETFs: BUY — since 07/22/2020

Click on chart to enlarge

Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) has now rallied above its long-term trend line (red) by +4.98% and remains in “BUY” mode as posted.

Read More

Popping And Flopping

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The first part of the session showed the bulls clearly in charge when suddenly Brexit concerns hit the headlines, which was followed by news that the Democrats voted to block the Republican’s stimulus bill. That was enough send stocks, bonds, and gold diving, while the dollar enjoyed a rebound rally.

ZH summed up the 3 things that kept the bullish dream alive in the last few weeks:

  • The Fed – hasn’t bought any HY/IG bonds in a while and balance sheet flat
  • Stimulus – fail on any further deal (McConnell Senate comments and skinny bailout bill didn’t pass Senate)
  • Vaccine – the AstraZeneca news did not help

The Nasdaq swung wildly between +1.5% and -2% causing one of our tech ETFs, which had been bouncing against its trailing sell stop point, to break through it, giving me a reason to sell it and take profits. The index has now moved back into correction territory, and we’ll have to wait and see if this was just another flesh wound, when compared to the recent enthusiasm, or if there is more injury to come.

At this moment, yesterday’s rebound looks like a dead cat bounce, but we are living in such uncertain times where anything is possible, so it pays to be more cautious and take some money off the table.

The much hoped for rotation from growth to value has not worked out so far, as both seem to be moving in sync.

Not helping the mood were Jobless Claims with the Initial ones staying about even with last week, while the Continuing Claims rose week-over-week.  

All this brings back the question as to whether the analog to 1929 is still valid. So far, it’s a remarkable development:

Read More

Comeback Wednesday

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After 3 days of the markets getting slammed, with the Nasdaq having one of its worst stretches and reaching correction territory, conditions became so oversold that buyers stepped in and restored bullish momentum.

As it turned out, the Nasdaq 100’s 50 day Moving Average provided critical support, at least for this session, and up we went.

“A setback like that seen in Nasdaq stocks over the past days has been overdue,” Commerzbank strategist Alexander Kraemer wrote citing excessive valuations. “Nonetheless, the underlying drivers of the recent rally remain in place. We believe that the recent setback will emerge as a buying opportunity for year-end performance.”

All the major indexes ripped higher, but the tech sector took top billing with a gain of +2.71%, but it is still down some 8% from its recent highs.

Tweeted analyst Jim Bianco:

The NASDAQ completed a 10% correction just 3 trading days after setting a new all-time high (September 2). This sets a new record for the fastest 10% correction in history.

The old record was 6 trading days from Feb 19 to Feb 27, 2020.

The NASDAQ Index started in 1978.

Even disappointing Covid-19 vaccine news and a ZH report that US Hiring unexpectedly plunged my most on record, despite a surge in Job Openings, nothing could stop the markets from thundering back.

The US dollar tanked, after recent advances, which helped gold to recover with GLD gaining a solid +0.97%.

We must wait and see if this was truly a turnaround Wednesday, or merely a hopeful blip in an ongoing correction.  

Read More

The Nasdaq Puke Continues

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Last Thursday’s sharp sell-off, which continued Friday in a more moderate fashion, thanks to a late rebound, accelerated today, as the Labor Day weekend did nothing to encourage a return to bullishness. Instead, the major indexes puked again, with the Nasdaq showing the steepest losses except for crude oil, which took top billing by swan diving almost -7%.

News about Softbank’s tech sector manipulation over the past few weeks made the headlines at ZeroHedge, as it became clear that the company, by using a sophisticated deployment of options and the their underlying stocks via billions of dollars, catapulted the markets no reckless heights, only to then unwind their positions leaving the Nasdaq supported by nothing other than an air pocket.

Added ZeroHedge:

Well, that escalated quickly… All of a sudden, out of nowhere, the Nasdaq, and most especially its high-flying mega-tech members, are collapsing faster than an Adam Schiff narrative. No news, no earnings, no headlines… just the fact that a massively over-levered Japanese ‘hedge fund’ is no longer buying massive exposure in call options and sparking the virtuous opening bid to ignite momentum and set the Robinhood traders up for the day.

The markets ended up bobbing and weaving on the red side of the unchanged line all day and accelerated into the close. Good thing, we started to lighten up on our most volatile tech holding last week and will continue to do so, as respective trailing sell stops get triggered.

Can things get worse? Here’s one opinion:

“Given how extreme many of the indicators we follow had become by early this past week, we believe it will take more than just a mild decline to work off those conditions,” Matt Maley, chief market strategist at Miller Tabak, said in a note on Sunday. “Therefore, we still believe a correction of more than 10% is probable.”

While that may be correct, it will be interesting to see where the Fed’s pain threshold lies which, once reached, may cause the Central Bank to flood the markets with liquidity and prop equities back up. After all, looking at this chart, it’s a long way down to correlation.

Spot Gold was offsetting the down draft very well, but the GLD ETF was not able to remain in the green but only surrendered a modest -0.18%.

Again, our exit strategy is defined and in place, as we move deeper into the notoriously volatile and unpredictable market period of September and October.

Read More

ETFs On The Cutline – Updated Through 09/04/2020

Ulli ETFs on the Cutline Contact

Below, please find the latest High-Volume ETF Cutline report, which shows how far above or below their respective long-term trend lines (39-week SMA) my currently tracked ETFs are positioned.

This report covers the HV ETF Master List from Thursday’s StatSheet and includes 312 High Volume ETFs, defined as those with an average daily volume of more than $5 million, of which currently 245 (last week 251) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line (%M/A) from those that have dropped below it.

Take a look:                                                                   

The HV ETF Master Cutline Report

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms. If you missed the original post about the Cutline approach, you can read it here.