ETF Tracker Newsletter For April 5, 2019

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2019/04/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-04-04-2019/

ENDING THE WEEK ON A BULLISH NOTE

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

The much-anticipated March payroll report turned out better than hoped for with the BLS reporting that the US added 196k in payrolls in March, which was a tad higher than the 177k expected. This has analysts now proclaiming that February’s dismal gain of 20k, which was upwardly revised to 33k, was an outlier and that we have “normalized.”

While the headline print was all that the computer algos cared about, there was some weakness under the hood especially in manufacturing, shopping and a lower than expected average hourly earnings number. If you care to, you can read the details here.

Zero Hedge quipped:

So where was the Growth? Here are the three key sectors:

  1. Professional technical services: +34K, mostly computer systems design (+11.5K)
  2. Healthcare: +61K
  3. Food Services: +27K

 In other words, Americans are eating themselves into obesity, at which point they need constant medical supervision. The good news: at least the American food epidemic will provide waiter/bartender and medical jobs for a long time to come.

While there was no long-term effect on equities, Trump temporarily caused a bit of confusion when he slammed the Central Bank by commenting:

“I personally think the Fed should drop rates, I think they really slowed us down, there’s no inflation, in terms of quantitative tightening, it should really be quantitative easing…you would see a rocket ship. Despite that, we’re doing very well.”

Hmm, this sounds just about the opposite from his tweet on 9/29/2011:

“The Fed’s reckless policies of low interest and flooding the market with dollars needs to be stopped or we will face record inflation.”

Be that as it may, the markets took it in stride with equities inching up and the S&P 500 closing at its high of the session. The biggest short squeeze in 2 weeks, along with Buybacks, added to bullish sentiment.

Still, the jaws of reality between stocks and bond yields paint a different picture and are widening every day. Sooner or later there will be an adjustment to bring this out of sync oddity back to normal.

The spread is currently some 500 S&P points, which means that a 20% drop of the index is required to normalize this relationship. To me, it’s not a question of “if” this happens but “when.”

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 04/04/2019

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, April 4, 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.

  1. 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 +5.48% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

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Uncertainty Reigns Ahead Of Jobs Report

Ulli Market Commentary Contact

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

The major indexes, except for the Nasdaq, were able to keep the bullish theme alive with the S&P 500 vacillating around its unchanged line before making a final spurt above it to close in the green. The Dow never dipped into the red and was engaged in a steady uptrend, while the Nasdaq was the odd man out by having a bumpy ride and falling a tad short of closing higher.

As happened yesterday, the U.S.-China trade talks remained in the spotlight with high expectations that both parties will be able to resolve their differences. Helping matters was Trump’s remark that talks were “moving along nicely,” even though no facts to back up this nicety were presented. In other words, the trade-talk-carrot continues to work wonders with equities.

On the economic front, we learned that initial jobless claims crashed to the lowest in 50 years, which provided some optimism for tomorrow’s payroll report that it would turn out better than last month’s disaster reading.

The hits keep on coming for the European economic powerhouse Germany. After growth forecasts were slashed by more than half yesterday, industrial orders plunged 8.2%, the most since the financial crisis. The cause was described as not reflecting global demand but more specific by the GDP contraction in Turkey.

Interest rates were steady with the 10-year bond yield hovering around the 2.5% level, which has been a floor over the past couple of days, as this chart shows. However, this could change tomorrow depending on the outcome of the jobs report.

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The Wednesday Shrug: Dismal Data Don’t Matter

Ulli Market Commentary Contact

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

The U.S.-China trade deal carrot, which has been dangled over the markets on many occasions in order to elicit a bullish response, moved to center stage again, as reports surfaced that a deal was 90% done.

Of course, as we’ve seen in the past, there were no definitive announcements, but merely hope that a deal will be reached in the coming weeks or months. Talks are allegedly in the endgame stage with the last 10% being the hardest and trickiest part requiring concessions on both sides.

For sure, it helped the markets find some footing after an early drift and upward momentum was restored at first before it faded again. But a last hour spurt assisted the indexes to a green close.

Not helping matters, and providing a negative background, was ADP with a dismal print of just +129k new jobs in March vs. an expected +175k, which is the weakest growth since September 2017. Then the US services PMI showed its ugliness by plunging to 19-month lows (from 59.7 to 56.1). At same time, US auto sales ended a cruel first quarter with dismal results for March with sharp year-over-year sales declines.

Given all that, we should have seen more of a sell-off but remember, in the new normal environment we’re living in, the level or direction of the stock market has nothing to do with underlying fundamentals. Even bond yields were off today with yields rising in the face of poor economic data. Go figure…

In the end, bad news was good news again with the major indexes managing to eke out some modest gains supporting our bullish stance.

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Taking A Breather

Ulli Market Commentary Contact

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

After rallying the past four trading days, it was time to take a breather with the major indexes traveling aimlessly around their respective trend lines. The S&P 500 closed unchanged, the Dow dropped -0.30%, while the Nasdaq managed to squeeze out +0.25%.

Bonds were on the mend with the 10-year yield dropping backing below 2.5% level to close at 2.472%. More importantly, the yield curve corrected and is no longer inverted, meaning that the 10-year bond now yields more than the 3-month one.

The U.S. Dollar index round-tripped, broke above the crucial 1,200 level twice but reversed to close lower. A day of consolidation best describes this session, which had not much effect on the direction of our Trend Tracking Indexes (TTIs).

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Starting The 2nd Quarter With A Bang

Ulli Market Commentary Contact

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

After closing out March on a positive note, April started with a bang, as the major indexes sported gains above 1%. The only fly in the ointment was a sharp spike in interest rates with the 10-bond shooting up almost 11 basis points to close at 2.5%, which kept the conservative ETFs in our portfolios lagging the indexes for the session.

The rally was a global one supported by an allegedly improved PMI in China, which showed its first expansion in 5 months supporting the narrative that global headwinds are over and Chinese optimism is warranted and now has replaced the U.S.-China trade talk euphoria. We’ve seen these “green shoots” in the recent past, as ZH pointed out, and all ended up being of short duration.

Of course, traders conveniently forgot that the Chinese a long time ago announced that econ data are “for reference” only, which probably means that they are carefully “goal-seeked” and supported by political motivation.

On the other side of the globe, the eurozone’s manufacturing index continued to struggle and remains in contraction territory. Here in the U.S., retail sales figures disappointed as reports showed that the tapped-out consumer spent 0.2% less in February than in January, showing a trend towards thriftiness, which economists expect to affect economic growth numbers in the first quarter.

For status of our Trend Tracking Indexes (TTIs), this was good day with both of them jumping deeper into bullish territory (section 3).

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