Uncertainty Reigns

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

As I posted yesterday, more of the same was indeed how this session turned out. Traders stayed away from making new commitments and, due to lack of buying enthusiasm, the markets drifted aimlessly ahead of tomorrow’s Fed announcement.

Although the major indexes wandered into the red, keep in mind that they are still within striking distance of new all-time highs, so this two-day slippage is meaningless.

Looking at the big picture, the tech sector surrendered yesterday’s gains, as “value” was favored over “growth” today, with RPV managing a +0.35% gain while Small Caps hit the skids by given back -0.98%.

On the economic front, retail sales for May fell 1.3%, worse than an expected 0.7%, and the Producer Price Index rose 0.8% vs. an anticipated 0.6%. While these numbers had a negative market effect, this was mitigated somewhat by the upcoming Fed meeting results due out on Wednesday.

Bond yields pretty much trod water, but the US Dollar broke out of its short-term sideways pattern and touched its June 4th highs. As is the case when dollar rallies, Gold lost its luster for this session and gave back -0.30%.

Concluded ZeroHedge:

Finally, the dismal disappointment in retail sales today, combined with Empire Manufacturing’s miss, a worse than anticipated drop in homebuilder confidence, and a bigger than expected drop in business inventories, the US macro surprise index fell to its lowest since May 2020…

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Impending Fed Meeting Keeps Markets In Check

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Red numbers were the theme this morning with the Dow and S&P 500 hovering below their respective unchanged lines with the former showing far more weakness than the latter. Resisting the early bearish mood was the Nasdaq, which maintained its bullish position, built on it throughout the session and ended it with a gain of 0.74%.

With bond yields rising today, but having shown weakness recently, traders drifted away from “value” investments in favor of “growth”—at least for the moment. Looking at the big picture, today was another quiet one, such as we’ve seen recently, and which is a sign of June’s historical trading patterns.

Of course, several concerns are ever-present, like looming inflation and potential moves by the Fed. Investor sentiment will be influenced by the Fed’s two-day policy meeting with the results due out around noon on Wednesday.

Hopes are high that the Central Bank will not announce any changes, but any future forecasts for interest rates, the economy and the elephant in the room, inflation, could easily affect market direction.

At the closing bell, markets were flat, but a last 30-minute ramp pushed the S&P 500 into record territory by the tiniest of margins, with the index ending the day up a puny +0.18%.

The 10-year yield continued its bounce off last week’s lows and, in combination with the US Dollar’s holding on to Friday’s gains, kept Gold in check with the precious metal ending lower by -0.64%.

I expect more of the same until Wednesday noon, at which time the Fed will have hopefully clarified its near-term policy.  

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ETFs On The Cutline – Updated Through 06/11/2021

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 264 (last week 258) 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 June 11, 2021

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

Treading Water

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Throughout the past week, the major indexes having been treading water, and today was no exception. The S&P 500, while peeking again into record territory, managed to eke out a weekly gain of 0.37%. During this session, we saw the index pump, dump, and pump again before fading into the close.

As was to be expected, yesterday’s poor CPI report was still on traders’ minds, with one technical analyst from Piper Sandler attempting to put a lipstick on that pig:

While the May CPI report came in above estimates, the market was not too surprised and digested the data as transitory for now, the Treasury market appeared to be in agreement with the temporary inflation outlook.

Sure, it was confusing to see the bond market’s lack of recognition of these inflationary trends yesterday, as yields were dropping instead of rising, which would have been a normal reaction. However, the power of the Fed’s resolve that these current tendencies are to be considered “transitory” is a view that pleases Wall Street and therefore has contributed to the continued ramp in equities and the plunge in bond yields.

While “growth” and “value” moved in sync today, for the week “growth” came out ahead, but YTD, “value” still remains the winner.

Over the past five trading days, bond yields collapsed the most in a year, as ZeroHedge pointed out, with the 10-year now reaching a level last seen the beginning of March. The US Dollar Index, after meandering all week, spiked sharply. That came as a surprise as lower yields usually pull the dollar down, but it goes to show you how much things are out of whack.

The fallout from the dollar’s surge was Gold, which got slammed by almost 1% with the precious metal again losing its $1,900 level.

Assisting the S&P 500 in making new highs is the fact that the Fed’s balance sheet continues to expand. It has reached almost $8 trillion this week, for the first time ever, and has basically doubled since the pandemic panic response, as ZeroHedge pointed out:

And this reckless monetary expansion continues to go on, despite the collapse of Covid, leaving me pondering “what’s next?”

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 06/10/2021

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, June 10, 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 +16.57% and remains in “BUY” mode as posted.

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Shrugging Off Inflation Anxieties

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Despite consumer prices accelerating at their fastest pace since mid-2008, with the Consumer Price Index (CPI) rising 5% YoY, you would not have known that by today’s market reaction. Apparently, the investment crowd has bought the theme spewed about by the Fed that inflation is or will be “transitory.”

The markets shrugged off any inflation concerns, and the S&P 500 promptly scored another intra-day record by touching the 4,249 level before pulling back into the close. All three major indexes, despite bobbing and weaving all day, recovered from an early dip, and closed in the green led by the Nasdaq with a +0.78% gain.

Today’s flip-flopping pattern included Small Caps, which eked out a gain after an early drop with VBK adding +0.57%, while the value based RPV slid again and gave back -0.87%, but YTD, the latter remains the king of the hill.

Interestingly, in light of the surging CPI number, bond yields slid with the 10-year down below the 1.5% level, at 1.45%, thereby touching its lowest point since March 14. The US Dollar Index pumped and dumped all day and ending the session lower.   

Needless to say, the CPI number gave an assist to Gold, which rallied a modest +0.30% but was not able to recapture its $1,900 level.

Added ZeroHedge:

Today’s big upside inflation surprise piles on the stagflationary evidence as production expectations remain too optimistic…

This chart makes this abundantly clear.

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