Gold Hits Record High As Dollar Strengthens And Bond Yields Dip

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

This morning, the market showed choppy behavior, as traders attempted to adopt bullish sentiment following yesterday’s pullback, which saw major indexes relinquish their record highs.

I expected the atmosphere of uncertainty to persist, driven by the ongoing earnings season and the upcoming presidential elections, both contributing to a “nervous” environment.

This week’s earnings reports have been mixed: banks have outperformed, while United Health and chipmaker ASML have fallen short of expectations.

On a positive note, Morgan Stanley exceeded estimates, and United Airlines also reported better-than-expected results.

Ultimately, the bulls prevailed, pushing the Dow to another record high despite stretched valuations. Of the 50 S&P 500 companies that have reported third-quarter earnings, 79% have surpassed expectations, maintaining a sense of optimism in the market.

Interestingly, the financial sector and Bitcoin have moved in tandem, both trending higher. Small-cap stocks outperformed, while the Nasdaq lagged, benefiting from a continued short squeeze.

Lower bond yields favored the utilities sector, with XLU, which we own, posting an impressive 2.01% gain. The 10-year yield briefly dipped below 4% but closed just above that level.

The dollar strengthened again, but this did not negatively impact gold, which rallied to a new closing record high. For now, gold and the dollar appear to have decoupled.

Bitcoin reached $68,000 today for the first time since July, while crude oil remained steady above $70.

Despite the rising foreign default risk for the USA, which has reached its highest level in a year, there seems to be little concern. However, this could become significant in the future.

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Nasdaq Leads Decline As MAG7 Basket Suffers Collateral Damage

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

The major indexes retreated from their highs as traders digested the latest earnings reports and observed the 10-year bond yield slipping back towards 4% from yesterday’s surge to 4.10%. So far, 40 of the S&P 500 companies have reported their latest results, with 80% surpassing analysts’ expectations.

Despite some traders acknowledging that the S&P 500 might be slightly overvalued, positive news flow has provided support during this notoriously volatile period. Consequently, the major indexes remain higher for the month.

In other news, reports that Israel allegedly agreed not to target energy facilities caused crude oil prices to drop nearly 4%, though they managed to stay above $70. Semiconductor giant ASML reported dismal earnings and outlook, resulting in a 17% stock drop, erasing all its 2024 gains.

The MAG7 basket suffered collateral damage, giving back all of yesterday’s gains, which led the Nasdaq to close lower ahead of the Dow and S&P 500. Among the big banks, five out of six reported gains, with Citi Bank being the exception. Bond yields pulled back from their recent rise, with the 10-year yield trending back to 4%.

The dollar maintained its bullish momentum, achieving its highest close since early August, while gold continued to rise towards record highs, diverging from the currency. Bitcoin also continued its upward trend, breaking out of its descending trading channel.

As Zero Hedge pondered: Will Bitcoin maintain its tracking of global liquidity?

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Tech Stocks Lead Market Rally; Bitcoin Surges Past $66k

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

Following Friday’s significant gains, the S&P 500 opened with a surge and reached another record high, driven by anticipation of positive earnings reports, despite the bond market being closed for Columbus Day.

Rumors from China about a new stimulus plan (quantitative easing) laid the groundwork for today’s market action, propelling both equities and cryptocurrencies significantly higher.

Major banking institutions like Bank of America and Goldman Sachs are set to report on Tuesday, following the positive earnings reports from JP Morgan and Wells Fargo.

These initial reports indicated a recovery in banking profits, with the 30 S&P 500 companies that have reported so far exceeding consensus estimates by an average of 5%, compared to a 3% beat in the previous quarter, fueling the current market enthusiasm.

However, several potential risks loom on the horizon, including the upcoming election, rapidly rising bond yields, geopolitical tensions in the Middle East, and uncertainties about the Federal Reserve’s future easing policies.

The MAG7 basket of stocks continues to push towards June’s all-time highs, with Nvidia achieving a new record and closing in on Apple’s market cap lead.

The most shorted stocks experienced a squeeze higher, while bond futures suggest lower prices and higher yields.

Bitcoin soared past $66,000, reaching its highest level since September, as the dollar climbed to a two-month high. Despite the dollar’s strength, gold remained stable within its recent trading range.

Although the VIX (volatility index) pulled back slightly, we are in a seasonal period where market conditions can change rapidly. Bloomberg noted that traders are hedging their positions more aggressively than in the first half of the year.

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ETFs On The Cutline – Updated Through 10/11/2024

Ulli ETFs on the Cutline Contact

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 (280 vs. 265 current).

Take a peek:

The HV ETF Master Cutline Report

If you are confused by some of the terms we use, don’t panic. I have a helpful Glossary of Terms for you.

If you want to learn more about the Cutline method and how it can make you rich (or at least less poor), read my original post here.

ETF Tracker Newsletter For October 11, 2024

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

INFLATION FEARS PERSIST AS STAGFLATION LOOMS, YET MARKETS CLIMB HIGHER

[Chart courtesy of MarketWatch.com]

  1. Moving the market

After undergoing a dip on Thursday, the major indexes regained upward momentum, with the S&P 500 not only achieving a fifth consecutive winning week but also setting a record.

However, the Nasdaq lagged, partly due to Tesla shares plummeting by approximately 7% following an underwhelming announcement about their “robotaxi.”

The start of the earnings season contributed to the positive market sentiment, as major banks exceeded profit and revenue expectations. HP Morgan advanced by 5%, while Wells Fargo surged around 6%.

The Producer Price Index (PPI) remained unchanged in September, contrary to the expected 0.1% increase, but it rose by 1.8% year-over-year, surpassing the 1.6% expectation. This temporarily alleviated some inflation concerns triggered by a higher-than-anticipated Consumer Price Index (CPI) increase. Consequently, traders are still anticipating two more 0.25% rate cuts this year.

However, medium-term inflation expectations increased, as reflected in the University of Michigan’s sentiment data for October, indicating that U.S. consumers are aware that inflation will persist in various aspects of life.

Additionally, the specter of stagflation has reemerged, with inflation rising and macroeconomic growth data declining. Despite these challenges, computer algorithms continued to drive stocks higher. Even the 10-year bond yield approaching 4.10% did not dampen bullish enthusiasm.

Heavily shorted stocks experienced significant short squeezes, while Chinese markets remained in turmoil due to government crackdowns, leading to an exodus of foreign investors.

Bond yields were mixed for the day, but the long end rose for the week. The dollar rallied for the second consecutive week but pulled back towards the close. Gold rebounded from Wednesday’s lows but fell short of its $2,700 target.

Crude oil traded sideways but managed to post a weekly gain. Bitcoin surged, reaching the $63,000 level.

Will Bitcoin continue to follow the direction of liquidity as shown in this chart?

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 10/10/2024

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, October 10, 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 +7.98% and is in “Buy” mode as posted.

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