ETF Tracker Newsletter For April 30, 2021

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ETF Tracker StatSheet          

You can view the latest version here.

EQUITIES SLUMP ON LAST DAY OF APRIL

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The futures markets already indicated a weak opening with traders deciding, despite good economic data and some blockbuster earnings (Amazon) but also some disappointments (Twitter), to cash in some of their chips.

As a result, the major indexes hovered in the red all day and closed with acceptable losses, considering that for the month the S&P 500 gained some 5%. The pullback was broad based with only a couple sectors sporting modestly green numbers.

For the month of April, all equity indexes scored gains with the Nasdaq in the lead and Small Caps lagging. Even Gold managed to climb some 3.5%, but the US Dollar continued its slide, down almost 2%, which was its first monthly loss since December 2020, according to ZH.

Not everyone thinks we are in a “Goldilocks” environment:

“The fact that 95% of the S&P 500 is now above its 200-day moving average is NOT a bullish sign,” Matt Maley, chief market strategist for Miller Tabak + Co., wrote in an April 26 note.

“Yes, a high number of stocks above their 200 DMA’s is usually positive, BUT it is NOT bullish when the number becomes extreme (like it is now…at 95%). In other words, this data point is much like sentiment. When it is strong, it is positive…but when it becomes extreme, it becomes a contrarian indicator!”

Maybe so, but right now the major trend remains up, but should it reverse, we have our exit strategy in place and will be ready pull the trigger, should the need arise.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 04/29/2021

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ETF Data updated through Thursday, April 29, 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 +20.68% and remains in “BUY” mode as posted.

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An Early Breakdown Followed By A Late Breakout

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The S&P 500 managed to find some footing, after a mid-day gag caused by surging bond yields, and scored another record close, powered by blowout earnings from the tech sector, namely Apple and Facebook. Despite their solid performances, the Nasdaq lagged the other two major indexes for the day by a wide margin.

On the economic front, we learned that 1st quarter GDP was reported at “only 6.4%,” which missed expectations of 6.6% but, is an improvement to the Q4 number of 4.3% The question that ZeroHedge posted “Is this all the growth that $2 trillion in stimulus can buy?” remains a valid one, and it casts doubt on the effects of future reckless money printing in terms what it can really accomplish.

Pending Home Sales disappointed due to low inventory, while last week’s Initial Jobless Claims totaled 553k, just a tad worse than the 528k estimated by Dow Jones.

Crowd favorites Uber and Lyft were manhandled today and got battered after Biden’s plan to make gig workers employees. Bond yields rode the roller coaster by popping and dropping as Bloomberg shows in this chart. The US Dollar roundtripped as well, sold off into the close but managed to eke out a gain. Gold followed suit but ended the session flat.  

While uncertainty played havoc with the markets intraday, in the end, the bulls managed to keep the upper hand when it counted most, namely at the close.

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Stuck In Limbo

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

While the futures were flat, the regular session opened with a bounce for the S&P 500, while the Dow and Nasdaq hovered below their respective unchanged lines. In the end, all three indexes meandered aimlessly all day and ended slightly in the red.

The much-expected Fed announcement was a nothing burger with no changes in policy neither in terms of tapering bond purchases nor any potential hike in interest rates. The statement was dovish with optimistic soundbites being offset by downbeat ones, as ZH posted:

…economic activity and employment have strengthened.

Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened.

The sectors most adversely affected by the pandemic remain weak but have shown improvement.

Yet:

The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain.

And most importantly, “inflation has risen, largely reflecting transitory factors.”

In other words, there was no meat on that bone, neither for the bulls nor for the bears, so we ended up going nowhere.

The US Dollar slumped to two-month lows, according to ZH, with bond yields heading south as well, a combination which benefited Gold, but only moderately.  

The Nasdaq showed no bullishness either, despite Google parent Alphabet reporting better-than-expected earnings after the bell on Tuesday with its shares rallying 3%. That was offset by Microsoft topping analysts’ estimates as well, yet the stock dipped 2.8%. Go figure…

All eyes are now on Joe Biden’s $1.8 trillion plan in new spending as well as tax credits for families in need. Higher income tax rates and an increase in capital gains taxes will make tonight’s showing one to remember.

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Treading Water

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After having closed at record levels yesterday, the S&P 500 and Nasdaq traded aimlessly around their respective unchanged lines, with the Dow treading water as well. The Nasdaq has now finalized a rebound from its 11% correction, which began in February.

Tesla shares retreated some 3% despite the company posting a record net income, while UPS shares rallied over 10%, as the company’s revenue was up 27%.

However, this was just the warmup for the big boys with Alphabet, Microsoft and AMD reporting this afternoon, as Apple and Facebook are due up after tomorrow’s close.

On the economic front, we learned that home prices recorded their biggest gain in 15 years. Consumer Confidence also rose sharply to its highest since February 2020.

Despite the relative calm, SmallCaps had a wild ride on a bronco by pumping and dumping after the opening and again into the close.   

Ahead of tomorrow’s FOMC meeting, bonds sold off as yields rose with the 10-year being supported by its 50-day M/A, according to ZH/Bloomberg. This helped the US Dollar to finally rebound, causing Gold to dip slightly.

It’s been now the 11th straight day that Commodities have risen, as Bloomberg demonstrates here. Yet, the Fed refuses to acknowledge that inflation is accelerating, or could even be a threat to this economy, and considers it simply transitory. Yeah right.

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Modest Advances Ahead Big Earnings Week

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Ahead of a big earnings week, two of the three major indexes managed to eke out some gains, while the Dow slid slightly into the red due to the consumer staples sector retreating over 1%.

The cause was surging commodity prices, which increased inflation fears, as corn and copper, among others, reached their highest levels in some 10 years. Of course, the Fed does not see inflation anywhere, but those of us that regularly buy groceries, fuel up our cars and use energy in our daily lives, have already experienced some of its effects.

Noted CNBC:

Bank of America data showed the number of “inflation” mentions during earnings calls this reporting season has tripled compared to last year, the biggest jump since 2004 when the bank started tracking the number.

On the earnings front, about 1/3 of the S&P 500 companies are set to release their quarterly report cards. Some of the big hitters like Apple, Microsoft, Amazon, and Alphabet are on deck as well.

The US Dollar rode a roller coaster and ended slightly lower, but it was enough volatility to give Gold a minor boost. Despite the overall positive tone in equities, bond yields stayed in a tight range and ended the session basically unchanged.

The continued bullish bias in equities has been supported by the easiest Fed monetary policy ever, as ZH pointed to in the below chart by Bloomberg:

Makes me go “hmm.” How much longer can that go on?

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