Climbing Out Of A Hole

Ulli Uncategorized Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

An early dump was reversed, especially by the Dow, which erased a 150-point loss and ended in the green by some 90 points, or +0.29%. The S&P 500 attempted the same magic but fell short, while the Nasdaq was the loser of the day with -0.58%, which was a major improvement from its lows of the session.

In the current non-directional environment, due to the ongoing rise in bond yields, highfliers like Small- and MidCaps are suffering the most.

Giving the markets an assist mid-day was none other than the Fed, after the release of the minutes of their last meeting suggested that easy monetary policy will remain in place for longer due to the economy being nowhere close to pre-pandemic readings.

“Participants noted that economic conditions were currently far from the Committee’s longer-run goals and that the stance for policy would need to remain accommodative until those goals were achieved,” the minutes stated.

On the economic front, we saw some surprises. Retail Sales surged by +5.3% MoM in January, quite a difference from expectations of a +1.1% increase. Industrial Production turned out better than anticipated, however, the data showed it still being down almost 2% YoY.

Bond yields spiked several times but lost some momentum into the close, as Bloomberg shows. As yields surged, gold and equities got dragged down with the latter finding some upward momentum late in the day. The US Dollar index built on yesterday’s gains and made sure precious metals had no chance of digging themselves out of an early hole.

As I pointed out yesterday, rising bond yields will be the biggest opposing force to keep equities in check, which is why I watch this arena very closely.  

Read More

Aimless Bouncing

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Despite the Dow eking out a modest gain, the markets were lacking enthusiasm, which spread to our favorite ETFs as well. Small- and MidCaps were down along with the Nasdaq and gold.

There simply was no place to hide, as the widely held Bond ETF TLT got slammed -1.57% and took out a southerly trending support line, which started in September. Or, put in other words, bond yields surged, thereby not only keeping a lid on equity advances but on gold as well.

The 10-year yield spiked to 1.30% this morning, a level not seen since last February, thereby crushing bond prices, which move in an inverse direction. That in turn took the starch out of equities, with the S&P hugging its trend line but slipping into the red at the close.

Early in the day, things looked bright with all three major indexes hitting record highs. Nevertheless, remember that, if yields continue to levitate, stocks become less attractive. The higher yield scenario would also present a threat to the tech sector, which has profited in this low-rate ecosystem.

Commented well-known strategist Art Hogan:

“The market can digest rising yields, especially when they are going up for the right reason, but not when they go up in a linear fashion.”

And that will be the fly in the ointment, as CNBC added:

Many worry that a rebound in rates could hinder the economic recovery from the pandemic-induced recession as companies and consumers may find it increasingly expensive to borrow. Others wonder if a deluge of fiscal stimulus could spark a rise in prices after a decade of dormant inflation.

Bond yields are the arena to watch, because if this upward trend continues, there will be a fallout effect in equities. The unanswered question is “when?”

Read More

ETFs On The Cutline – Updated Through 02/12/2021

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 265 (last week 264) 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 February 12, 2021

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

STALLING FOUR DAYS IN A ROW BUT GAINING FOR THE WEEK

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The aimless meandering of equities continued for the 4th day in a row, but a sudden ramp into the closed made today’s session a more successful one. ETF specific, SmallCaps lagged again (IWO: +0.11%), but MidCaps (IWP) picked up the speed and added +0.96% thereby trouncing the Nasdaq’s +0.50%.   

Even with its tiny gain, the Dow managed to eke out another record high, following the S&P 500 and Nasdaq, which both set records yesterday in the face of only fractional advances.

Opined one analyst:

“Is the path to much higher equities becoming smaller … to put it differently, are the bulls attempting to thread a needle? Seems that way near term.”

Be that as it may, February’s performance so far has been outstanding with the Dow gaining +4.7%, while S&P 500 and Nasdaq added +5.4% and +7.1% respectively. For the year 2021, the S&P has scored nine record closes.

On the economic front, we learned that Consumer Sentiment declined to a six-month low due to personal income deteriorating and more Americans anticipating faster inflation in the year ahead, according to ZH.

What kept the markets in check for most of the session were rising bond yields in the 10- and 30-year arena, thereby affecting gold negatively. Even though the US Dollar has been sliding for the past week or so, today it bounced moderately but enough to keep gold from recovering.

Despite the 4-day slowdown, today’s rally into close bodes well for Monday’s opening.

Read More

Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 02/11/2021

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, February 11, 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 a 7.5% 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 7.5%-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 +19.13% and remains in “BUY” mode as posted.

Read More

Stuck In Neutral

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

This session turned out to be very similar to the last two, with the major indexes looking for direction but ending up getting stuck in a sideways pattern with not much won and not much lost.

The S&P 500 and Nasdaq eked out some small gains while the Dow slipped a tad into the red. Even this year’s powerhouse, SmallCaps (IWO), could not muster any strength, but closed in the green by a meager +0.08% and were outperformed by MidCaps (IWP), which sported a +0.72% gain.

It appears that the strong February rally has hit a flat spot and is need of a new driver to pick up the recently lost momentum. Fiscal and monetary stimulus have been priced in the markets, with all eyes now being on a broader economic recovery, along with a broader reopening of businesses and an improved distribution of the vaccine.

Not helping matters today was a worse-than-expected reading of weekly jobless claims. First time filers totaled 793k, which was higher than the expected 760k. Those week numbers go along with Fed head Powell’s assessment yesterday that “in real terms, unemployment remains around 10%, as bad as at the peak of the financial crises.”

He then added:

“Published unemployment rates during COVID have dramatically understated the deterioration in the labor market.”

Also increasing uncertainty was the rise in bond yields during the 30-year auction, which left some traders scratching their head, as yields spiked after their recent easing, demonstrated in this chart by Bloomberg.

The US Dollar continued on its southerly path, but it was not enough, given spiking bond yields, to support gold, which subsequently surrendered -0.88%.

ZH featured another analog comparison to the 1929-1932 period asking this question:

“It’s different this time…but will it end the same?”

Just food for thought.

Read More