Stuck In No Man’s Land

Ulli Market Commentary Contact

[Chart courtesy of]

  1. Moving the markets

Bullish attempts to keep yesterday’s comeback alive ended up failing, as the major indexes surrendered early gains and ended up the hugging their respective unchanged lines with not much to show for.

Initially, stocks had blasted higher, despite weakness in the futures markets. For a while, it looked like we were facing another “bad news is good news” scenario, as Fed President Harker opined that the “US economy might see a modest contraction in growth,” along with “we could have a couple of negative quarters.”  

This negative talk was immediately translated as being a positive for the markets, as it would move the recession into the more immediate future, which would then result into inevitable rate cuts and a new QE program. That “should” translate into a revival of the bull market, or so the theory goes.

Regarding inflation, the Fed is way behind the curve and needs to implement a far more aggressive tightening cycle. Analyst Simon Ree tweeted this amazing stat:

Once inflation goes above 5%, it has never come back down without the Fed Funds rate exceeding the CPI.

As ZH explained, the problem is that the current CPI is 8.58% and the Fed Funds rate is only 1.58%. Graphically, it looks like this. That means the Fed would need to hike at least 7% until inflation would start to roll over and potentially allow for the so-called soft landing. Good luck with that…

Despite falling bond yields, equities could not sustain any upward momentum. The 10-year plunged 12 bps to close at 3.16%. The US Dollar dumped after yesterday’s pump, while gold meandered aimlessly but closed a tad in the green.

Sure, we could see another short squeeze into the end of this quarter, but in my mind, its duration will be questionable.

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Another Bear Market Rally?

Ulli Market Commentary Contact

[Chart courtesy of]

  1. Moving the markets

It comes as no surprise that the major indexes would eventually manage a bounce back from the brutal losses not only YTD but also from last week, which saw the S&P 500 surrender -5.8%—its worst 5-day stretch since 2020.

A more aggressive stance on interest rate hikes by the Fed, and increasing odds of a recession, combined forces to give the bears the upper hand. Considering the ever-worsening economic numbers, any rebound may be short-lived, but opinions also abound that the sell off was way overdone.

For sure, rebounds or rallies into the end of any quarter occur with great regularity, which means we’ll have to wait till July to get a better handle on whether this is simply a dead-cat-bounce or a true bottom. I believe it’s the former and not the latter.

Looking at economic numbers, you must wonder what drove today’s rally. Existing Home Sales tumbled to a 2-year low, according to ZeroHedge, with the NAR warning that “worse is to come.”

Adding to that negativity was a deteriorating Chicago’s National Activity index. As a result, we can see that the Economic Surprise index keeps worsening. Bond yields were mixed with the 10-year adding 6 bps to close at 3.30%. The US Dollar slid, but it was not enough to lend support to gold, as the precious metal lost -0.42%.  

In the end, today was simply a reprieve for the buy-and-holders, but keep in mind that one bullish day does not indicate a directional trend change.

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ETFs On The Cutline – Updated Through 06/17/2022

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 22 (last week 41) 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.               

ETF Tracker Newsletter For June 17, 2022

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.


[Chart courtesy of]

  1. Moving the markets

Stocks were fortunate that today’s $3.9 trillion quadruple options expiration’s event did not do more damage to an already beaten down equity market. While it was a seesaw day, the major indexes ended the session hugging their respective trend lines with the Nasdaq finally showing a moderately green close.

Yesterday’s spanking, during which the Dow dropped some 750 points, pulled the index below its psychologically important 30k level, but bearish momentum was too strong today for it to recover that milestone marker.

Despite the S&P’s feeble attempt to close above its unchanged line, for the week it posted its worst loss (-5.8%) since 2020. It was a brutal five days for all the major indexes, as we are not only facing higher interest rates but also an economic slowdown.

The Dow has had now 11 down weeks out of the last 12, which has never happened before, as Macro Data is collapsing at an unprecedented rate. Quipped ZeroHedge:

Remember, there are 12 more rate hike priced in from here…good luck America  

Then this from JPM head of trading desk, Elan Luger:

“I think we are past inflation at this point. The only thing confirmed yesterday is that the Fed will to do whatever it takes to get inflation back to target. If that means slowing the economy to a halt and crashing the stock market, so be it.”

Crude Oil fell back below $110, with Wholesale Gasoline prices following suit, while oil and gas exploration imploded 7.2%, as ZH reported. We also learned that US Manufacturing Output unexpectedly shrank in May.  

None of these data indicate an expanding economy, which means, right now we are witnessing the Fed hiking rates into a slowing environment, with yet unknown consequences.  

Bond yields were slightly higher for the week but flat for the day with the 10-year making 2 attempts this week to break above its 3.50% level, both of which failed. To me, it’s just a matter of time that this point will be broken and appear in the rearview mirror.

Bloomberg updated its Misery Index, which demonstrates an interesting comparison. However, the bigger misery has happened to the Buy-And-Hold crowd, which does not need an index but must face these ugly numbers:

SPY down -22.80% YTD. TLT (long bond ETF) down -24.6% YTD.


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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 06/16/2022

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, June 16, 2022

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 an 12% 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. Here too, I recommend trailing sell stop of 12%, or less, 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: SELL — since 02/24/2022

Click on chart to enlarge

Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) has broken below its long-term trend line (red) by -14.99% and remains in “SELL” mode.  

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Fed Hikes Rates Sharply—Will Stay Aggressive

Ulli Market Commentary Contact

[Chart courtesy of]

  1. Moving the markets

The much-anticipated Fed announcement came and went, with the Fed hiking rates by 75 basis points, its largest increase since 1994. They also hinted at a similar increase in July, which indicated some seriousness about its inflation fighting efforts, but it also caught traders of guard.

It’s been no secret that the Fed’s policy has been out of sync with inflation realities, so today’s aggressive stance pleased the markets—at least for the time being. The question remains whether the Fed is now hiking rates into a recession.

So far, the answer is “very likely,” as the Atlanta Fed slashed its Q2 forecast to 0.00% from the recent 0.9%, which means the US is on the verge of a technical recession after Q1’s contraction, as ZeroHedge called it.

Yet, Fed head Powell had this to say:

The US economy is in a strong position and well positioned to deal with higher interest rates.

There is no sign of a broader slowdown in the economy that I can see.

Hmm, I am sure that Powell will have eat these words eventually, in the same way he had to walk back the “inflation is transitory” scheme.  

The markets took it all as a bullish sign, and after the recent drubbing managed to string together a green close. Sliding bond yields helped, with the 10-year dropping some 16 bps to close at 3.31%.

That downward action caused the US Dollar to puke and surrender some of its recent gains. The beneficiary was gold, which stormed out of the gate and ripped higher by +1.3%, while Crude Oil extended its recent losses.   

In economic news, Homebuilder Sentiment tumbled back below pre-Covid levels, as ZH pointed out, and US Retail Sales unexpectedly tumbled in May and showed its first negative print since December 2021.

All this simply shows that the likelihood of “Stagflation” being in our future seems to increase on a daily basis.

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