PPI SURGE IGNORED AS TRADERS FOCUS ON RATE CUT HOPES; ECONOMIC SURPRISE INDEX HITS 2015 LOWS

Ulli ETF Tracker Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After yesterday’s pullback, bullish sentiment resurfaced, and the major indexes stormed ahead and closed solidly in the green. The rally was broad based, which helped some of the non-tech areas to scoop up some gains, with especially Small Caps scoring their best week in 8 months. An enormous short squeeze provided the necessary firepower.  

The tech sector also snapped back with bargain hunters picking up some favorite names like Nvidia and Apple. But the MAG7 stocks ended the week lower.

Banks kicked off the earnings season, but even stronger than expected results failed to lift that area.

The much-anticipated PPI came in at the fastest pace in 15 months, which pushed the YoY number up to 2.6% vs. expectations of 2.3%. However, traders simply ignored those numbers and still focused on yesterday’s drop in consumer prices, which increased optimism that the Fed would finally initiate a rate cut in September. Since there will be no Fed meeting in August, the September time frame is now in focus.

Despite market optimism, the week was bad when it came to data releases, as the Economic Surprise Index took a dive and closed at lows last seen in 2015. In terms of rate-cut expectations that was good news, and they resumed their upward trend.

Bond yields tumbled, as the dollar dropped and wiped out all returns since early June. Bitcoin eked out a gain for the week, despite the German government dumping all their coins for unexplainable reasons.

Gold surged and is approaching its record highs, but crude oil, despite a valiant attempt, surrendered its $83.50 level.   

With the S&P 500’s reckless advances in the face of shrinking Global Central Bank balance sheets, I am pondering:

Are traders expecting a massive inflow of liquidity to justify this huge divergence?

If that does not occur, this alligator snout will snap shut in a hurry.

Read More

Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 07/11/2024

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, July 11, 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 +6.64% and is in “Buy” mode as posted.

Read More

Gold Surges, Nasdaq Slumps: Economic Uncertainty Drives Market Shifts

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The much-awaited CPI fell 0.1% last month from May, which reduced the annual inflation rate down to 3%. Expectations were for a monthly increase of 0.1% and annual rate of 3.1%.

Core CPI, which excludes food and energy, and is the most closely watched number by the Fed, came in at an annual rate of 3.3%, also below expectations. Bond yields took a dive with the 10-year dropping some 8 basis points.

Odds of a September rate cut surged to greater than 80%, but no action by the Fed is expected later this month. Traders’ hopes increased that another potential cut may happen in December, that is if inflation data cooperates.

The classic adage “buy the rumor, sell the fact” made its presence known, as the S&P 500 and Nasdaq sold off moderately, while the Dow held on and broke even. With the economy clearly being in tumble mode, this was reflected in the Macro Surprise Data index, which plunged to its lowest since 2015.

We appear to be moving from stagflation to recession, if this chart, thanks to ZH, is any indication. Gold took advantage of that uncertainty and surged over 1.7% on the session, while bond yields cratered, as the dollar got spanked.  

The Nasdaq took the brunt of the beating, but Small Caps found some life and rallied. Tesla tumbled on robotaxi news, and Nvidia pulled back and lost 5%, but crude oil rebounded and climbed back above $83.

With relentless attention being given to a potential rate cut, let me show you one of most scary charts demonstrating what happens, if the Fed indeed makes such a policy change:

Almost 100% of the time, the markets have gone south in a big way.

Be careful what you wish/hope for, and make sure you have an exit strategy in place, so that you do not become part of history, should it repeat itself.  

Read More

Rumors Of Leaked CPI Data Fuel Market Gains: Will Tomorrow’s Release Disappoint?

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Wall Street’s optimism that the upcoming inflation numbers will be favorable for the markets carried over into today’s session, as the S&P 500 rose for a seventh straight day.

Economists expect the June CPI to advance 0.1% MoM and 3.1% YoY. The core CPI, which does no include food or energy prices, is predicted to have gained 0.2% MoM and 3.4% YoY.

So far, traders have simply ignored any economic downside risks, which have emerged recently, and have focused on hopes that the Fed will do whatever necessary and rescue the markets and the economy with a less restrictive policy.   

Fed chair Powell helped the major indexes power higher when he emphasized what traders wanted to hear, namely that the bank won’t wait until the rate of US inflation slows to its 2% goal before cutting rates:

“If you waited that long you probably waited too long because inflation will be moving downward and would go well below 2%, which we don’t want.”

That’s all it took, and we ramped to a solid green close, not only in the tech sector but in the broad market as well. The Mag 7 stocks advanced for the 7th straight day as well as 10 out of the last 11.

Rumor had it that tomorrow’s CPI number had been leaked, which also may have underpinned today’s strong bullish sentiment. Rate-cut expectations rose, as bond yields more or less trod water.

The dollar slipped, gold headed higher but gave back some of its early gains later on. Oil prices surged but fell short of recapturing their $83 level, while Bitcoin rallied but ran into overhead resistance at its 200-day M/A.

Today’s strong session makes me ponder: Will the real CPI release tomorrow be a disappointment or a springboard for further advances?  

Read More

Markets Hold Steady Awaiting Powell’s Testimony And Upcoming Inflation Data

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The S&P 500 and Nasdaq kept inching higher with traders trying to figure out the true meaning behind Powell’s prepared remarks. He opined that keeping interest rates elevated for too long could risk further economic growth, which Wall Street took as a hint that a less restrictive policy might be on the horizon.

On the other hand, nothing the Fed head ever says is clear, as he followed up with comments that “reducing policy restraint too late or too little could unduly weaken economic activity and employment,” and “more good data would strengthen our confidence that inflation is moving toward 2 percent.”

For sure, this was good enough to keep the bullish sentiment going, so the major indexes, except for the Dow, kept the rally alive, although the gains were modest. Again, it’s worth noting that the current upswing is not broad based and has been predominantly driven by the tech sector.

Powell will continue his testimony before Congress on Wednesday ahead of the release of the CPI and PPI inflation data. I am convinced that he will not send any signals as to the possible timing of this much desired and talked about potential rate cut.

Bond yields went nowhere, but Bitcoin found some footing and surged back above $58k. The dollar remained in its recent narrow trading range, as gold followed suit but eked out a green close, while crude oil not only lost its upward momentum but also its $82 price level.   

I expect tomorrow to be another calm trading day, because traders are all focused on Powell’s next talk and the release of the CPI number on Thursday.  

Read More

Traders Eye CPI And PPI As Market Sentiment Remains Cautiously Optimistic

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The major indexes inched higher this morning with the S&P 500 rising to a new record, after having advanced for its 4th week out of the last five. This move was supported by hopes that allegedly easing inflation in combination with a weakening economy could cause the Fed to cut interest rates. In the end, a sluggish session did not create much activity.

Traders are now eyeing the June CPI, which is due out on Thursday. That is followed by the PPI on Friday. As usual, the algos will primarily jump on the headline numbers and drive the indexes either up or down. Still, optimism prevails that a weaker figure will show improvement so that current bullish sentiment can be sustained.

Last Friday’s labor data showed an increase in non-farm payrolls of 206k and an uptick in the unemployment rate to 4.1% vs. expectations of 4.0%. Looking under the hood, it turned out that the past two months of data were revised and did not show any meaningful job gains. I expect the same to happen next month when it’s revision time again. Go figure…

The most shorted stocks provided chaotic trading, during which we saw an early squeeze, which lost steam as the session wore on. The MAG 7 stocks trod water, as bond yields were stuck in a tight trading range.  

The dollar was subdued, while crude oil lost its $83 level again. Bitcoin rode the rollercoaster all weekend and gave new meaning to the words dump, pump and dump. Gold’s Friday ramp ran into overhead resistance with the precious metal losing about 1%.

It was a session mired in uncertainty, but the upcoming inflation numbers will surely light some fires.  

Read More