The Trump Pump: One Phone Call Saves The Markets

Ulli Market Commentary Contact

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

I was watching the futures markets last night as the major indexes were getting hammered on a follow through move from Friday’s sell-off. Even early this morning, the Dow had plunged 200 points when Trump suddenly announced that “China called our trade people last night and said let’s get back to the table.” He then told reporters that China called his team not once but twice in a bid to restart trade talks.

While that sounded good on the surface, the only problem was that none of this happened, according to China. Whatever the case may be, the objective was accomplished in that the markets reversed and soared, as the computer algos did not care about remarks by the Global China Times editor that Trump indeed “hallucinated” the 2 phone calls…

No, I am not making this up, and it is not April Fool’s Day either, this is nothing more than a sign of the insanity that drives the markets nowadays. ZH actually went through the trouble of charting some of this early morning idiocy.

In the end, the intra-day meandering ended during the last hour of trading when the indexes shot up and closed in the green thereby delaying a potential ‘Sell’ signal for our Domestic Trend Tracking Index (TTI).

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ETFs On The Cutline – Updated Through 08/23/2019

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 157 (last week 199) 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 August 23, 2019

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

FED SPEAKS: MARKETS DROP LIKE A ROCK

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

To be fair, it wasn’t just Fed chief Powell’s Jackson Hole speech that put the markets in a sour mood. The hammer came down hard, after Trump unleashed a verbal tirade, first towards the Fed:

As usual, the Fed did NOTHING! It is incredible that they can “speak” without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work “brilliantly” with both, and the U.S. will do great. My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?”

If that was not enough, he upped the ante in response to China’s threat to levy new tariffs on the US:

“We don’t need China and, frankly, would be far better off without them“, and ordered “Our great American companies… to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”

“I will be responding to China’s Tariffs this afternoon.”

Not much else was needed to shift the computer algos and traders into selling mode and down we went. There was no looking back with all major indexes closing deeply in the red, and that reaction did not even include Trump’s mystery “afternoon” announcement.

The war of words can’t get much uglier, and we may see more fallout next week when the rhetoric is sure to continue. In the meantime, the G-7 meeting is on deck for this weekend in France. Last time, the get-together was such a disaster that the seven nations could not even agree on a common communique. I don’t expect much more this time.

This week’s wild swings in the market have left their mark on our Trend Tracking Indexes (TTIs). As posted, the International one headed into bear market territory on 8/15/19, while the Domestic one bounced off its trend line and has held steady until today.

The Domestic TTI has now slipped slightly below its long-term trend line (see section 3) and may very well signal a move to the sidelines next week. We are also approaching the notoriously volatile month of the September, where anything is possible.

Stay tuned!

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 08/22/2019

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, August 22, 2019

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 +2.83% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

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Riding The Range

Ulli Market Commentary Contact

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

An early rally fizzled, as uncertainty over the outlook of interest rates kept traders on edge, especially due to the upcoming Fed statement regarding the Jackson Hole meetings. I think Fed head Powell’s position on rates is well known, and his upcoming speech on Friday is likely to disappoint those hoping for more dovishness.

Not helping the markets was an announcement by the German Bundesbank proclaiming that “they don’t see a need right now for fiscal stimulus at this time, even though they expect the economy to shrink again this quarter.”

That was totally opposite of what was expected, and markets started to sag. Then another hawkish nightmare appeared out of nowhere when the Fed’s Patrick Harker opined in an interview that “he doesn’t see any need for further stimulus at the moment.”

Some of his soundbites included:

  1. “Yield curve is only one of many signals.”
  2. “Trade issue makes business decisions difficult.”
  3. “Growth now is exactly what we had anticipated last year.”
  4. “No need for another rate cut, central bank should stay here for a while.”
  5. “Trade resolution would boost growth.”

Ouch. That was not exactly what traders had hoped for, so the markets continued riding the range but managed to eradicate some of the early session losses.

Nevertheless, Fed chair Powell is set to deliver a speech tomorrow, during which investors will be eagerly looking for clues as to whether another rate cut will be on deck for September.

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The Roller Coaster Continues

Ulli Market Commentary Contact

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

Good earnings by consumer heavyweights Target, Lowe’s and Home Depot set the bullish mood early on and pushed equities up to a level that they sustained throughout the session. All of yesterday’s losses were wiped out with the S&P 500 closing exactly at Monday’s price.

The Fed minutes did not offer any earthshaking news other than to confirm that the July rate cut was simply insurance for growth and inflation and considered to be a mid-cycle adjustment. It’s supposed to help counter the effects of weak global growth and trade uncertainty.

Good economic news came from housing sector, as we learned that Existing Home Sales rose YoY and thereby breaking a 16-month losing streak. They came in at +0.6%, while the median sales price also advanced by 4.3% from a year earlier.

Offsetting this good news were reports that the RV industry crashed with domestic shipments to dealers plummeting 20% so far this year, after dropping only 4% for the entire year of 2018. Ouch.

On the global scene, Germany attempted to sell the world’s first 30-year negative yielding bond (-0.11%), which failed miserably. When the dust settled, it turned out that only 824 million Euro of the total 2 billion Euro offering were sold with the Bundesbank now being forced to retain the unsold portion. That’s a big ouch. After all, government bonds need to be sold to cover the ever-growing deficits.

For the week, we saw that Monday was up, Tuesday was down, and Wednesday was up. This rollercoaster may very well continue until the bankers’ Jackson Hole meeting ends on Friday, or the weekend G-7 meeting results, or lack thereof, make their presence felt on Monday.  

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