Thriving And Diving

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

In a repeat performance from yesterday, the major indexes rocketed higher right after the opening but then lost their mojo, headed below their respective unchanged lines but managed to eke out a small gain.

The S&P 500 hovers less than 1% from its record high in May and is having trouble breaking through that glass ceiling. The Dow and Nasdaq are also positioned within striking distance of their record levels with the former needing a 1.5% rally, while the latter has some 3.5% to go before reaching that lofty point.

Inflation fears and the uneven economic reopening seem to be keeping a lid on further advances, as is Friday’s upcoming big jobs report. After last month’s disaster, expectations are for 671k new nonfarm payrolls, considerably higher than April’s 266k, for which the whisper number was close to 1 million.

The most shorted stocks were subjected to an epic squeeze, their biggest since the chaos with GME in January, according to ZeroHedge. Small Caps rode another roller coaster and ended slightly in the red (VBK), while “value” again outperformed “growth.”

The US Dollar index was stuck in a world of its own with an early rip followed by a mid-day dip back to the unchanged line. Bond yields slid with the 10-year slipping to the 1.59% area. This allowed Gold to rise moderately and solidly its position above its recently conquered $1,900 level.

I expect more of the same tomorrow with trader’s being focused on Friday’s jobs report.

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Aimless Wandering

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Despite a bullish start to open the first day of trading in June, the major indexes lost their early upward momentum throughout the day. The S&P 500 and Nasdaq dropped below their respective unchanged lines, bounced back, but still ended up slightly in the red, while the Dow stayed in the green.

In the end, the indexes closed just about unchanged. Two forces were engaged in a tug-of-war, namely optimism about the continued economic reopening, which was challenged by increased fears about price pressures because of spreading inflation.

At least for the day, the latter won this tug-of-war with “value” again winning the battle against the “growth” sector. The broad S&P 500 value ETF (RPV) scored a respectable +1.04%, and the Small Cap Value ETF IJS did even better by adding a rock-solid +1.94%.

According to CNBC, concerns about supply shortages remain front and center, and may have unintended consequences:

Despite the better coronavirus figures, investors remain on edge about the potential for a sustained and marked move higher in inflation. Higher prices the result of supply shortages and recovering demand could force the Federal Reserve to hike interest rates and curb asset purchases sooner.

Bond yields were higher and back above the 1.61% level for the 10-year. The US Dollar went south, but that drop was not enough for Gold to overcome rising bond yields. As a result, the precious metal trod water, vacillated around its unchanged line, yet successfully managed to defend its $1,900 level.

Not much was gained or lost on this first day of June, but if you were exposed to “value” ETFs, you have something to smile about.

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ETFs On The Cutline – Updated Through 05/28/2021

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 256 (last week 254) 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 May 28, 2021

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

S&P 500 NOTCHES A 4TH STRAIGHT WINNING MONTH

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

As we’ve seen before, an early bounce hit the skids mid-day and accelerated towards the end, however, the major indexes managed to eke out a green close with the S&P 500 scoring its 4th straight winning month.

For May, the Dow added 1.9%, the S&P 500 gained 0.6% but the Nasdaq was the odd man out and lost 1.5%, which was its first down month in seven.

Inflation continues to be with us, as a key indicator, namely the core personal consumption index, rose 3.1% in April and exceeded expectations of a 2.9% increase. But analysts were quick to point out that this was not as bad as Wall Street had feared, which means that interest rates and bond yields should remain low—at least that’s how the wishful thinking goes.

Looking at the big picture, the US Dollar has slumped to its major support level set it 2018, and it remains to be seen if the bears will continue to have it their way. If Gold’s recent advance of over 7.5% in May is any indication, the dollar may very well visit its next support level set in 2014.

During the month, the 10-year bond yield raced from a low of 1.46% all the way to 1.7% and settled at the higher end of the range—just below 1.60%.

As mentioned above, Gold performed very well in May, which clearly confirms that, despite officialdom jawboning to the contrary, inflation is here to stay and may get worse. It should be clear to anyone that inflation cannot be simply turned on and off at will, just like you can’t push the toothpaste back into the tube.

Despite the much touted and discussed Fed toolbox, they really are limited to one major option, which is eventually to sharply hike interest rates a la 1980, should the problem get out of hand.  

If that measure is enacted, you can kiss the bond-, stock- and housing markets goodbye.   

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 05/27/2021

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, May 27, 2021

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 8% 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 8%-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 +17.75% and remains in “BUY” mode as posted.

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Battling For Altitude

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After an early rally, the major indexes spent the remainder of the session struggling to maintain their gains but were not able to with prices slipping and the Nasdaq dipping into the red. However, the Dow and S&P 500 were able to advance modestly.

Better-than-expected Initial Jobless Claims provided the ammunition for the early surge. The Labor Department reported that these claims had tumbled to their lowest since the lockdown began, as “only” 406k Americans filed vs. 425k expected.

But, as ZeroHedge pointed out, that is still double the pre-pandemic norms and, despite this improvement, almost 16 million Americans area still on some form of government dole.

As news of Biden’s enormous budget hit the wires, bond yields spiked and stocks started to retreat, except Small Caps, which remained solidly in the green. So did the value ETF RPV, which had a strong showing of +1.22%, thereby clearly outperforming the “growth” sector.

The US Dollar index rode the rollercoaster and ended just about unchanged, while the Gold ETF GLD managed to eke out a tiny gain in the face of rising bond yields.

For sure, we saw a slowdown in trading and volatility ahead of the long Memorial Day weekend. I expect more of that tomorrow with traders’ enthusiasm to bid up stocks ahead of a Holiday not being their priority number one.  

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