1. Moving the markets

The markets were on standby this morning hanging on every word that Fed chair Powell was uttering at a congressional testimony. He confirmed that the central bank has adopted a wait-and-see approach due to some economic data having pointed to slower U.S. growth, despite a report showing an increase in consumer confidence.

He added that “the job market remains strong” and “we are seeing signs of stronger wage growth,” a remark that may have some members of his interest rate committee consider voting for a hike in rates in order to front-run any resulting inflation.

With no new earth-shaking news coming our way from the U.S.-China trade talks, the markets focused on the above, with bulls and bears slugging it out around the unchanged line with no clear winner at the end.

The S&P 500 ran into tough overhead resistance at the 2,800 level again and seemed to take directional cues from the S&P Buyback index. Looking at big picture, we see an interesting trend. Namely, that the S&P 500 follows Global Money Supply, while being out of sync with the US Macro Surprise Index and forward EPS expectations.

Eventually, something will have to give to bring these indicators back into alignment. Will the S&P 500 move down or will the other 2 indicators move up?

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1. Moving the markets

An early bounce had the S&P 500 piercing its overhead resistance zone, namely the 2,800 point. However, the index was not able to hold on, as a slow and steady decline pulled equities off their lofty levels. Good thing we ran out of time, or we might have seen a red close.

As it turned out, the major indexes ended up only fractionally in the green, as early euphoria, that Trump may be inclined to delay China tariffs, waned. But he said that “substantial progress” in trade talks have been made over the weekend.

So, the trade deal headlines appear to be a wonderful tool to keep the markets in check now that the earnings season has ended. Any economic news, no matter how poor they are, register as “good news” for the computer algos, as we’ve seen last week when retail sales collapsed.

Additional assists supporting the early rally came from corporate buybacks and a huge short squeeze, both of which were the spark that got things going. And then there is this diversion, which, no matter how many times I post it, leaves me pondering: Who will be right in the end?

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ETF Tracker StatSheet

https://theetfbully.com/2019/02/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-02-21-2019/

A SEA OF GREEN; TRADE TALK OPTIMISM IS ALIVE AND WELL

1. Moving the markets

It sure seems that complacency rules supreme when it comes to market behavior with yesterday’s bad news, when a bombardment of economic data missed, either being forgotten or at best can be seen in the rear-view mirror. Trade talks between U.S. and China are current front-page news—not much else seems to matter.

Northman Trader summed it up like this:

Bad data doesn’t matter because stocks go up. A China deal will be positive and a catalyst to buy stocks. If there is no real China deal a cosmetic one is good enough. Since bad data doesn’t matter any good data is bullish too. In short, bad news is good news and good news is good news.

 It’s blind faith in a system that never has to face any consequences as the central bank put reigns supreme.

Be that as it may, equities opened in a sea of green across world markets thanks to the usual support cast, namely optimism about the trade talks.

The major indexes vacillated above the unchanged line and were never in danger of breaking it to the downside, despite a short-lived mid-day pullback that seemed to do nothing but strengthen the bullish resolve.

The Dow managed to reclaim its 26k level and close above it, while the S&P 500 stormed higher, but did not quite reach its major overhead resistance area, namely the 2,800 zone.

Still, despite this levitation to ever new heights, I wonder if eventually fundamentals, on which stock prices are really based, will kick in and take the starch out of this exuberance. After all, forward earnings are collapsing while the US Macro Surprise Index is not in sync with the S&P 500.

But all that matters right now, however, is the long-term trend, which is up and supported by our Trend Tracking Indexes (TTI). It confirms that the bull is alive and well—at least for the time being.

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1. Moving the markets

Despite continued trade talk optimism, the markets were not able to gain any footing and never managed to climb back above the unchanged line. Weak economic data points supported the bearish mood, but it was not enough of an early drop to keep me from executing our International ‘Buy’ signal by purchasing a low volatility global ETF.

Domestic economic news was negative all the way around but, surprisingly, the equity pullback was moderate with the major indexes surrendering less than -0.50% with global markets doing even better.

Here’s what made headline news:

Durable-goods orders rose 1.2% but failed to meet expectations of 1.4%.

A key measure of business investment, known as core orders, slipped -0.7%.

Manufacturing activity tumbled while leading indicators headed south by -0.1%.

Existing home sales fell -1.2% in January, its third straight month of declines

It will be interesting to see to how far the “trade news headline ping-pong” can carry this market before traders become impatient and reverse their bullish attitude. However, the latest statement disclosed that U.S. and Chinese negotiators are in the process of outlining a proposal to end the endless tit-for-tat.

I had to laugh when ZH reported this:

So, with earnings season almost done and no economic news tomorrow, can traders relax for a bit? Hardly: expect headlines from the ongoing US China trade talks to start leaking over the next few hours, while tomorrow’s barrage of Fed speakers (8 of them) virtually assures that the market will be talked higher come hell or high water.

In the meantime, both of our Trend Tracking Indexes (TTIs) remain on the bullish side of their respective trend lines thereby supporting our current ‘Buy’ signals.

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