ETF Tracker Newsletter For January 24, 2020

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

Markets Suffer From An Infection

[Chart courtesy of MarketWatch.com]
  1. Moving the markets

An early bounce turned out to be short-lived, as ongoing issues with the coronavirus infected the markets, with equities registering their first losing week for this year. Despite the pullback, the S&P 500 remains still up by almost 2% for 2020.

A last hour rebound reduced losses, which were less than 1% for the major indexes. Again, the fear is that China’s coronavirus may disrupt travel and slow down global growth.

Even good quarterly earnings reports by Intel and American Express were not enough to establish confidence and motivate dip buyers to step in.  

ZH summed up the market effects like this:

  1. Shanghai Comp’s worst week in 8 months
  2. S&P 500’s worst week in 5 months
  3. “Most Shorted” stocks had their biggest weekly drop in 4 months
  4. France’s CAC 40 worst week in almost 4 months
  5. VIX’s biggest weekly spike in almost 6 months
  6. HY Bond Prices worst week in almost 5 months
  7. Treasury yields biggest weekly drop in 4 months
  8. Yield curve’s biggest weekly flattening in 2 months
  9. USD’s best week in 2 months
  10. Yuan’s worst week in 4 months
  11. Copper’s worst week in over 5 years
  12. Oil’s biggest weekly drop in 8 months
  13. Gold’s 6th weekly rise in last 7 weeks

Despite various squeeze attempts, when looking at the entire week, the most shorted stocks won the squeeze fest for a change by doing what they do best, go lower.

With weakness in the markets being prevalent, you would have thought that the divergence between stocks and bonds would finally narrow, but it didn’t, as this chart from Bloomberg shows. Sure, stocks dropped but so did bond yields, thereby keeping the spread as wide as ever.

The propagation of the virus, or hopefully its containment, will be closely watched over the weekend, but it will likely have further effects on market direction.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 01/23/2020

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, January 23, 2020

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 02/13/2019

Click on chart to enlarge

Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) is now positioned above its long-term trend line (red) by +9.02% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

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Moving From Optimism To Pessimism, But Markets Recover

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
  1. Moving the markets

As this chart shows, news about the coronavirus played havoc with market direction over the past 3 days, with optimism causing rallies and pessimism pulling equities back down.

The overall impact was relatively minor so far, given the relentless march higher over the past few months. An early drop caught some support, and a slow but steady climb out of that early hole helped the major indexes to close moderately in the green, with the Dow falling just short.

Still, China continues to struggle to get a handle on the viral outbreak that has so far killed 17 people and infected 650 in several countries, according to MarketWatch. Helping the markets recover was a statement from WHO (World Health Organization) that they will not yet declare the coronavirus outbreak to be a global health emergency.

A good old-fashioned short squeeze kicked in, after the early market drop, and made its contribution to the recovery of the indexes back towards the unchanged line. As the Nasdaq touched new record highs, bond yields went the other way causing a divergence, one of the many we’ve seen over the last year, with none of them having affected equities negatively.

For right now, the major trend remains firmly in place.

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No Market Report

Ulli Uncategorized Contact

A variety of engagements kept me away from the office, so that I won’t be able to write today’s report.

Regular posting will resume tomorrow.

Ulli…

Snapping The Winning Streak

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
  1. Moving the markets

Sometimes, any reason will do for the markets to pull back, especially after they’ve been on a relentless tear. Today, news of the first case of the coronavirus in the U.S. seemed to dampen spirits, and risk assets were sold.

No surprise there, because after the record setting run of the major indexes, a pull back was way overdue, after the S&P had risen for two consecutive weeks, while the Nasdaq had been on fire sporting gains for six straight weeks.

So, today’s less than -0.5% retreat is not even newsworthy. Not helping the Dow was Boeing, whose troubles with their 737 Max airplanes don’t seem to go away and news, that the company is in talks “to secure a loan of $10 billion or more,” certainly did not create any warm and fuzzy feelings for investors.

You could consider today’s market activity simply being a case of investor fatigue, as in addition to the above, sluggish economic growth outside the U.S., and the start of the impeachment trial, all combined to let the bears finally have their moment in the sun.

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ETFs On The Cutline – Updated Through 01/17/2020

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 322 High Volume ETFs, defined as those with an average daily volume of more than $5 million, of which currently 292 (last week 288) 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.