1. Moving the markets

Yesterday’s bullish momentum continued through the early morning when, suddenly, the trend reversed, and equities stumbled lower.

The catalyst for this turnaround came from Marco Rubio, who followed through on yesterday’s threatening tweets that he will soon be filing a bill to change the taxable status of what ZH termed “the only thing that is keeping stocks afloat,” namely corporate buybacks.

ZH then succinctly summed up the rollercoaster day like this:

US equities drifted higher overnight, surged at the cash open, dumped on Marco Rubio’s tweet about taxing buybacks, then ramped back to the highs – because, well… just because…. and then faded as Trump asked Congress for more funding in the border bill…

Still, the bulls remained in charge as the S&P 500 opened and closed above its 200-day M/A for the first time since December. Today’s action confirmed yesterday’s domestic ‘Buy’ signal, so I pulled the trigger and bought some low-volatility ETFs in my advisor practice.

We’ll have to wait and see if upward impetus is maintained before looking for further opportunities in domestic equity ETFs. Our International TTI has now also reached a level that is within striking distance of a new ‘Buy,’ which could very well materialize within the next few days.

Stay tuned…

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1. Moving the markets

The markets shifted into overdrive supported by nothing more than news of a tentative deal that would keep the government from being shut down for the second time this year. Of course, as we all know, Trump’s border wall funding, or rather lack thereof, had been a stinging point between Republicans and Democrats.

The new but not final arrangement would include 55 miles of border fencing and involve far less money than Trump had demanded. The latest headline said that he was not happy with it, but did not yet reject it, but his approval is needed for this arrangement to go through.

To the computer algos, it did not matter whether there was a deal or not, they simply pumped the indexes higher. Throwing an assist was optimism (not fact) that the trade negotiations between China and the U.S. were progressing positively with more high-level discussions on deck for Thursday.

In the end, the major indexes closed solidly higher with the S&P 500 finally conquering his 200-day M/A and closing slightly above it. Our Domestic Trend Tracking Index (TTI) jumped and closed above its trend line for the 3^rd day in a row. The odds of a resumption of the prior bull market have increased, thereby generating a new ‘Buy’ for “broadly diversified domestic equity ETFs.”

Of course, you can never be sure if this the beginning of a race to take out the old highs or simply another head fake. To minimize the effects of the latter, here’s how I approach it in my advisor practice:

1. I will watch market activity for a couple of hours tomorrow morning to see if the trend remains steady, or if there is a giant sell-off in the making. If the major indexes are heading back south again, I will wait another day before making a commitment.
2. If sentiment is stable, I will look for partial exposure in low-volatility equity ETFs that have shown good performance and a better than average resistance to sell-offs.

If you follow along, you can also use my Thursday StatSheet to select ETFs that meet your risk tolerance. Once this ‘Buy’ signal is underway, I will update the 10 ETFs in the spotlight.

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1. Moving the markets

It was choppy trading session with the major indexes hugging their respective trend lines throughout the day. Neither big dips nor strong rallies were to be seen anywhere, as momentum in either direction was conspicuously absent.

Part of this uncertainty may have been caused by a winding down of the earnings season and nervousness about a flood of important data points scheduled to be published later this week. On deck, we have the U.S. CPI index and a look at the Q4 GDP in Germany, which is suspected to confirm a slowdown in activity.

This is followed by releases of trade, credit and CPI data in China, as well as GDP in the U.K., while the wait for Brexit goes on. Other headlines suggest a U.S. government shutdown as early as Friday, until which time we will still be facing the remainder of the earnings releases.

In the end, it was a mixed day that had no effect on our current view that we need to have more upside confirmation to generate a new domestic ‘Buy’ signal.

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