Signs Of Fatigue

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

An early rally bit the dust, with the major indexes not being able to sustain the initial bullish momentum. The losses were small, less than 0.25%, and the Nasdaq ended just about unchanged.

Amazon came under pressure after a DC attorney launching a lawsuit on antitrust grounds, which, by affiliation, affected the entire tech sector. Airlines and cruise lines gave an assist and kept the broader market from sliding further.

Small Caps rode the rollercoaster today being up 1% at the onset and down 1.57% (IJS) at the close, thereby ending up worse than the major indexes.

On the economic side, New Home Sales plunged, after a massive downward revision for March (from 20.7% to only 7.4%), with April showing a drop of 5.9% MoM. At the same time, US Home Prices exploded by rising 13.19% YoY, the fastest since 2005, according to ZeroHedge.

The US Dollar pumped and dumped and closed slightly lower. The 10-year bond yield retreated as well, thereby giving Gold a reason to rally, and the precious metal added not only +0.84% but also reclaimed its $1,900 level—although by only a small margin.

The Fed’s balance sheet keeps growing and remains the primary reason for equities to hover at these elevated levels, as this chart by Bloomberg clearly shows, while US Macro Data are heading in the opposite direction.

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Recapturing Upward Momentum

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Right after the opening bell, the bulls took charge, after having lost the momentum battle last week, with the major indexes climbing solidly led by the embattled tech sector. Positive news about the continued economic reopening provided the ammunition for the Nasdaq to advance solidly after the recent spanking.

Throughout the session, there was no hesitancy as to market direction with minor pullbacks being quickly bought, as this week got off to a good start. I guess traders were re-thinking the Fed’s hawkish FOMC minutes from last week and decided that “buying the dip” was the way to go, a mentality that has provided support throughout this year and prevented corrections from becoming more serious.

So far, only the Dow is on track to score a gain for May, while the S&P 500 may snap its three-month winning streak. The Nasdaq, which is still down some 3% for the month, may finally break its 6-month winning streak. But there are still four trading days left…

With the US Dollar Index down, and 10-year bond yield retreating, Gold was the beneficiary again by gaining 0.33%.

With tech taking the lead for the day, the S&P 500 (SPY) outperformed its “value” cousin RPV by a good spread, yet on a YTD basis, the latter is ahead by a huge margin, namely +31% vs. 12.5%.

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ETFs On The Cutline – Updated Through 05/21/2021

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 254 (last week 253) 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 21, 2021

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ETF Tracker StatSheet          

You can view the latest version here.

STRUGGLING TO MAINTAIN ALTITUDE

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Despite some analysts’ expectations for a sharp increase in volatility due to options expirations today, where anything is possible, this session turned out to be better than expected.

The major indexes opened higher but slowly lost their upside momentum throughout the day with the Nasdaq faring the worst, while the Dow ended up in the green and the S&P 500 more or less stuck to its unchanged line.

In the end, even though we saw another wild ride in the market, the losses were minor with the S&P 500 surrendering 0.4% for the week.

Helping the overall positive sentiment was a gauge for US Manufacturing, which surged to a record high, however, offsetting the good news was an unexpected tumble in Existing Home Sales for April, which missed expectations dramatically. But prices continued to soar.

Here’s how ZeroHedge saw today’s news cycle:

1015ET *CHINA REITERATES CALL FOR CRACKDOWN ON BITCOIN MINING, TRADING (slamming crypto and pushed the entire stock market lower too)

1205ET *HARKER: SHOULD SPEAK ABOUT REDUCING BOND BUYS SOONER THAN LATER (pushed S&P down to unchanged)

1220ET *BOSTIC: MONITORING ECONOMY TO ASSESS TRANSITORY VS OTHERWISE (thanks Captain Obvious)

1225ET *KAPLAN: SHOULD DISCUSS UNINTENDED EFFECTS OF EMERGENCY TOOLS (little late for that now?)

1225ET *BARKIN: WHEN WE MAKE SUBSTANTIAL FURTHER PROGRESS, WE’LL TAPER (yada yada yada)

1250ET *KAPLAN: RATHER GENTLY TAKE FOOT OFF ACCELERATOR THAN BRAKE LATER (so tapering then?)

1345ET *KAPLAN DECLINES TO PUT DATE ON WHEN FED SHOULD START TAPER TALK

1430ET *WHITE HOUSE SAYS INFRASTRUCTURE COUNTEROFFER REDUCES PRICE TAG TO $1.7T (spooked stocks a little)

The US Dollar index bounced off its lows and ended the week slightly lower, while 10-year bond yields dipped back below the 1.62% level. Gold bobbled around aimlessly with its ETF GLD eking out a tiny gain of 0.05%. Showing a far better return was the value ETF RPV, which added another 0.77%.

Is the economy really improving as much as some cheerleaders seem to think? If you look at the Citi US Macro Surprise Index, it’s questionable, because this indicator just dipped into the red for first time since June 2020.  

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 05/20/2021

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, May 20, 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 +17.42% and remains in “BUY” mode as posted.

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Cautiously Advancing

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After three days of losses, the major indexes found some footing which, despite some ups and downs, provided enough upward momentum to ensure a green close. For a change, the Nasdaq led the way with a solid, yet long overdue rebound of 1.77%.

On the economic front, we learned that first-time claims for unemployment fell to 444k in the past week, better than the expected 452k, which is the lowest since March 14, 2020. If this trend can hold, we will finally make some progress and head in the right direction.

Today’s bounce-back included Small Caps and predominantly the tech sector with “value” lagging, as the Nasdaq took the limelight.

The US Dollar, which spiked Wednesday, lost its stamina, and gave up all of yesterday’s gains. Part of the reason was the drop in bond yields with the 10-year retracing its recent run. As is the case when that duo collapses in unison, the beneficiary ends up being gold. Today was no exception, and the Gold ETF GLD added +0.43%.

On deck tomorrow will be options expirations, which can increase volatility and influence markets negatively, but that does not mean that the long-term bullish trend will be violated.

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