ETF Tracker Newsletter For August 30, 2019

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ETF Tracker StatSheet          

You can view the latest version here.

TRADE WORRIES CONTINUE TO DISSIPATE; S&P 500 UP FOR DAY BUT DOWN FOR THE MONTH

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

An early rally bit the dust with the major indexes losing upside momentum, dipping into the red and bouncing around their respective trend lines throughout most of the session. A last hour push helped the Dow and S&P back into the green, but the Nasdaq fell just short and closed down a tad. For the month, Transportation and SmallCaps fared the worst, while the Dow and S&P lost the least.

Helping this week’s comeback was the proper dangling of the trade carrot, which helped the markets climb out of last Friday’s deep hole, while recovering some of the losses sustained in this volatile month of August.

It sure paid to be invested in the less volatile SPLV, which gained +2.14% vs. the S&P 500’s loss of -1.8%. Since our Domestic ‘Buy’ cycle in February, SPLV has gained 11.69% vs. the SPY’s +6.35%.

With the US-China trade talks, or rather lack thereof, having taken centerstage, one analyst described the impasse as follows:

“Despite U.S. tariffs on $300 billion worth of Chinese goods set to be raised beginning Sept. 1, another round of trade talks could take place in the month ahead. Such a possibility allows markets to continue clinging on to hope that a resolution to this protracted impasse is not dead in the water, with traders using this as an excuse to push further into risk-on territory at any given opportunity.”

And there you have it. It’s either US-China words of hope for any improvement in trade relations or dovish jawboning from the Fed, with either one of those events being the drivers of equities; fundamentals be damned.

Buybacks gave an assist to the markets on several occasions, as this chart by ZH clearly shows. Selected short squeezes also had an impact, as you can see here, although they weakened towards the end of the month.

We’re now staring the always volatile September in the face, and I’m sure it won’t be smoothing sailing. Our trailing sell stops are ready to be executed, should the need arise.  

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 08/29/2019

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ETF Data updated through Thursday, August 29, 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 +2.45% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

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Easing Trade War Fears Fuel Markets

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

When all else fails, a few well-chosen words seem to be enough these days to put a sagging market back into bullish mode. Such was the case today, when China indicated that they were in no rush to respond to the latest round of tariffs announced by Washington.

In the process, this week’s rebound has sharply reduced the month-to-date losses for the major indexes. In the case of the S&P 500, the index is now only down -1.85%, while at its worst point, on August 14th, we saw a loss of -4.66%. With tomorrow being the last trading day of the month, we could see another move higher, should positive trade jawboning continue.

However, today’s jump caused an opening gap in the S&P 500 chart (red circle), which eventually must be closed, meaning that the index will retreat to cover that gap. It always happens, it’s just a question of when.

At the same time, the S&P 500 is closing in on the upper range of its current trading band, as I posted yesterday. The above chart shows that level (blue line) at around the 2,945. If pierced, we may very well see an assault of the July highs.

If recent history is an indication, we could bounce off that “glass ceiling” and head back down to the support line, which lies at the 2,820 level. If that is shattered to the downside, a break of the 200-day M/A (red) will come into play, which might have dire consequences in that it would not only bring the June lows into play but also end this current bullish cycle.

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Digging A Hole And Climbing Out Of It

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Despite an early sell-off, caused by the bond market flashing a recession signal, the major indexes managed to climb out of that hole supported by a lift from the energy sector, as oil prices showed new signs of life. Even with that good effort, we remain stuck in a trading range with the ceiling of the S&P 500 being in the 2,945 area, while the bottom lurks around 2,820.

That’s a huge range, in which we’ve been seesawing since early August. A push through the ceiling may bring all-time highs back into play, while a break below the bottom may cause the index to revisit its June lows of 2,728. The Dow as well is rangebound between its 100-day and 200-day M/As.

Better-than-expected earnings from Hewlett Packard and Tiffany helped to fuel the fire and kept the bullish rebound going. The only fly in the ointment was low volume, which is typical for the week ahead of Labor Day.

The big news came from the bond market with the 30-year Treasury Bond now yielding less than what the S&P 500 pays in dividends. ZH charted it like this. This is so unusual and has only occurred for about 3 months in the past 40 years.

It confirms that markets continue to be distorted beyond recognition.

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Losing Momentum; Hope For A Trade Deal Vanishes

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

An early follow through rally hit the skids and reversed with the major indexes ending up closing in the red.

It seems that yesterday’s attempt by the White House to try to revive the trade carrot ran out of steam, when China’s Global Times editor signaled that there appears to be no great desire (on their part) to move towards a trade deal any time soon:

“China on Tuesday issued 20 directives to boost consumption, in an effort to further tap domestic market, not putting so much emphasis on trade talks. China’s economy is increasingly driven internally, it’s more and more difficult for the US to press China to make concessions.”

That was enough to take the starch out of  equites with the Dow leading the race towards negative territory. It was a seesaw session that is sure to continue, as any potential trade talks are bound to include more saber rattling and will be tumultuous at best.

In economic news, we learned that US home price growth slowed to the weakest in 7 years with the meager MoM rise of 0.04% missing expectations of an 0.1% rise. This now the 15th straight month of YoY declines in price, despite plunging mortgage rates.

It looks like the markets are stuck and are erratically reacting on the latest headline news, which seem to do nothing but support the current roller coaster. A breakout is sure to come sooner or later with the question being “will it be to new highs, or will we head towards bear market territory.”

Stay tuned.

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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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