Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 07/14/2022

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ETF Data updated through Thursday, July 14, 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 -12.02% and remains in “SELL” mode.  

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CPI Shock: Markets Tank, Crank, And Tank

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

A hotter-than expected inflation report showed that the CPI rose 9.1% YoY in June, which was higher than May’s 8.6% reading, that had been the biggest increase since 1981. Economists expected an 8.8% print.

Even the Core CPI, which excludes food and energy, came in at 5.9% and topped the 5.7% estimate. On a monthly basis, the CPI was up 1.3% compared to hopes of 1.1%. Finally, some traders and investors are waking up to the fact that inflation has not yet reached its peak—far from it, in my opinion.

Initial market reaction was fast and furious with the Dow dropping over 400 points before staging a comeback. The reason for that sudden rebound was a report in the WSJ by Fed leaker Timiraos that a suddenly much feared 100bps rate hike in two weeks may not be realistic but a 75bps was.

That sent equities almost into a vertical ascent with the S&P 500 and the Nasdaq briefly seeing green numbers. However, Atlanta Fed President Bostic pulled the rug out from under this rally with quotes like this:

“Everything is in play.”

Asked if that included by raising rates by a full percentage point, he replied:

“it would mean everything.”

That destroyed any hope or confidence the WSJ article had created, so the major indexes headed back south but closed off their worst levels for the session.

It means rate hike expectations are rising this year, with subsequent rate cuts virtually guaranteed in 2023, as the Fed will bail us out of a deep recession, as ZeroHedge put it.

Bond yields spiked following the release of the CPI report, then dropped with only the 2-year yield closing higher. Gold rode its own roller coaster. The precious metal first puked then spiked and closed with modest gains.

ZH summed up the current environment like this:

  • Stocks are still bipolar, and squeeze driven, as well as hoping beyond hope that the subsequent easing, after The Fed pushes the economy into recession, will save the day…

 Hmm…

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Stocks Are Dipping—Global Stagflation Is Ripping

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After hesitantly spending some time above their respective unchanged lines, bullish momentum, as insignificant as it was, disappeared, and the major indexes staged a turnaround and dumped into the close.

It was a lackluster session with the same old standby worry, namely economic growth, as Wall Street braced itself for tomorrows key inflation data via the release of the CPI. It’s no secret that growth is slowing, and Central Banks remain in inflation-fighting mode, which means more rate hikes.

The earnings season started well with PepsiCo’s report card and forward guidance turning out better than expected. Keep in mind though, that those businesses which do not pass on their higher input costs will have deal with squeezed profit margins, which will negatively affect their stock prices.

So far, the case for Stagflation remains on deck, as inflation is consistently hotter than expected and economic growth weaker than expected, according to ZeroHedge.

Bond yields dumped and pumped, but the 10-year remained below its 3% level. The biggest sell program in 2 weeks kicked in today, and those already were among the biggest in history.

The loser of the day was Crude Oil, which tumbled over 8% to close at under $96.    

All eyes are on tomorrow’s CPI report, which has exceeded expectations for the past 5 months, with the S&P 500 having fallen by an average of -0.78% on CPI-day, as ZH reported.

Will tomorrow be different?

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And The Bearish Beat Goes On

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

With uncertainty about the upcoming earnings season taking center stage, and traders having more questions than answers, the markets simply took the path of least resistance, which was down.

The major indexes never saw any green numbers and vacillated below their respective unchanged lines, as the Nasdaq fared the worst by dropping -2.26%.

We have now reached an economic environment where past earnings are taking a backseat to future guidance and expectations, as companies tried to wrestle with rising prices, slowing growth and inflationary pressures, with the Fed appearing to be more aggressive in its interest rate hiking plans as traders had hoped for.

Analyst Peter Tchir called the overall confusion this way:

  • Recession risk is real versus the economy is doing okay and a soft landing is on the table.
  • Recession risk is bad for risky assets versus recession risk keeps rates lower which is good for risky assets.


After having had time to digest Friday’s jobs report, ZeroHedge reported that the realization dawned that the labor market was in fact not as strong as talking heads had proclaimed.

The futures markets started things in the red and that negative sentiment set the tone for the entire session. Not helping matters was the absence of a short squeeze, which seemed to have run out of ammo.

Even a drop in bond yields across the board did not make a difference, despite the 10-year dipping below its 3% level again. The US dollar rallied, Crude Oil dropped, and Gold drifted lower.  

A variety of critical data releases are on deck this week, with the most watched being the CPI and the PPI, either one of which can have market moving effects.

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ETFs On The Cutline – Updated Through 07/08/2022

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 21 (last week 22) 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 July 8, 2022

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

WILL GOOD NEWS BE BAD NEWS AGAIN?

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The markets finally managed to eke out a winning week after the relentless losses during the month of June, despite a “good news could be bad news scenario” waiting in the wings.

All eyes were on the nonfarm payrolls which, on the surface, came in better than expected. For the month of June, we saw an increase of +372k jobs from the Establishment survey, which was better than the 250k Dow Jones estimate.

Looking under the hood, however, ZeroHedge pointed to an unexplainable discrepancy, namely that the Household survey showed just the opposite via a loss of -315k jobs. That seemed odd, since both numbers run pretty much in sync, as this chart shows.

In fact, since March, the Establishment Survey shows a gain of +1.124 million jobs while the Household Survey shows an employment loss of -347K!

Hmm…

On one side, you could not have asked for a better number in terms of the state of the economy, but on the other, the market now must come to terms with the Fed hiking by 75bps later this month and may not reverse its inflation fighting stance as quickly as had been anticipated.

Rate hike expectations reversed and jumped higher during this week. It was a period of bobbing and weaving, which ZH summed up like this:

  • Commodities crushed – recession anxiety, demand weaker? (but China reopening and stimulus)
  • Bonds crushed – strong enough economy, inflation-fighting Fed hawkish
  • Stocks strong – recession anxiety, end of Fed easing closer (Growth >> Value)
  • Gold down hard – strong enough economy, inflation-fighting Fed hawkish
  • Dollar up strong – strong enough economy relative to Europe (Fed ‘hawkisher’ than ECB)
  • Payrolls headline strong BUT household survey ugly – so is the economy ‘strong enough’ or a shitshow?

The short squeeze of the past few days ran out of steam, as bond yields headed higher with the 10-year reclaiming its 3% level and closing at 3.08%.

Commodities slipped and Gold followed suit but managed to show a green number today, while Crude Oil showed a similar weekly pattern to the precious metal.

For the record, this two-week period staring July 1st is the most bullish one of the year, as ZH elaborated.

But—will it last?  

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