Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.
The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (268 vs. 271 current).
DOW CHARGES AHEAD: BEST WEEK OF THE YEAR DESPITE TODAY’S SLIP
[Chart courtesy of MarketWatch.com]
Moving the markets
Despite a slight dip in today’s session, the stock market maintained its upward trajectory, with the Dow Jones Industrial Average charging towards its most impressive week of the year. The three major indexes all posted robust gains: the S&P 500 surged by 2.3%, the Nasdaq climbed 2.8%, and the Dow led the pack with a 2.1% increase, marking its strongest performance since December.
The market’s overall trend remains bullish, highlighted by a series of new highs and on course for a fifth straight month of growth. This week’s Federal Reserve meeting contributed to the optimism, as the central bank held interest rates steady. Fed Chair Powell’s remarks suggested that rate cuts are on the horizon, despite recent high inflation figures that had some investors bracing for a delay in monetary easing. This assurance was sufficient to propel the market forward.
While the markets seem to be riding a wave of enthusiasm, it’s worth noting that the Fed’s comments don’t guarantee a rate cut in June. Nonetheless, the Economic Surprise Index is on the rebound, and expectations for a rate reduction are mounting. Consequently, it’s no shock to traders that stocks have soared to new heights, with all major indexes wrapping up a strong week, led by the Nasdaq’s performance.
Midweek saw an intense short squeeze that eventually fizzled out, resulting in a subdued finish. Meanwhile, falling bond yields lent support to the markets, the dollar surged to a six-week peak, and Bitcoin held steady around the $64k mark. Gold hit a record high early in the week but retreated to close nearly unchanged, mirroring crude oil’s trajectory after its peak on Tuesday.
However, the recent surge in crude oil prices, now over $80, could spell trouble if the trend persists. Rising fuel costs may negatively impact the upcoming Consumer Price Index (CPI) report and influence the Federal Reserve’s decision on whether to implement a rate cut in June.
Out of the 1,800+ ETFs out there, I only pick the ones that trade over $5 million per day (HV ETFs), so you don’t get stuck with a lemon that nobody wants to buy or sell.
Trend Tracking Indexes (TTIs)
These are the main indicators that tell you when to buy or sell Domestic and International ETFs (section 1 and 2). They do that by comparing their position to their long-term M/A (Moving Average). If they cross above, and stay there, it’s a green light to buy. If they fall below, and keep going, it’s a red light to sell. And to make sure you don’t lose your shirt if things go south, I also use a 12% trailing stop loss on all positions in these categories.
All other investment areas don’t have a TTI and should be traded based on the position of each ETF relative to its own trend line (%M/A). That’s why I call them “Selective Buy.” In other words, if an ETF goes above its own trend line, you can buy it. But don’t forget to use a trailing sell stop of 12%, or less if you’re feeling nervous.
If some of these words sound like Greek to you, please check out the Glossary of Terms and new subscriber information in section 9.
DOMESTIC EQUITY ETFs: BUY— since 11/21/2023
Click on chart to enlarge
This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has broken above its long-term trend line (red) by +11.55% and is in “Buy” mode as posted.
Today, the stock market saw a significant uptrend, with technology shares outshining the rest. This surge builds upon the previous session’s momentum that set new records on Wall Street. Leading the charge, mega-cap technology companies like Meta Platforms, Microsoft, and Amazon each saw gains of at least 1%. In contrast, Apple experienced a 3% decline amid an antitrust lawsuit filed by the Justice Department.
The market’s upward trajectory continued from Thursday, propelling the three major indexes to unprecedented closing highs. Notably, the S&P 500 surpassed the 5,200 level for the first time. These gains align with the Federal Reserve’s recent announcement, which signals three potential interest rate cuts this year while maintaining current borrowing costs.
Federal Reserve Chairman Jerome Powell, in today’s press conference, hinted at possible rate reductions if the downward trend in inflation persists. However, the specifics of these cuts remain undisclosed.
A slew of positive economic indicators—including the Philly Fed, jobless claims, PMIs, Leading Indicators, and existing home sales—contributed to a rise in the Citi Economic Surprise Index. Yet, this wave of optimism has paradoxically dampened the anticipation for rate cuts in 2024.
As bond yields showed mixed signals, the dollar made a strong comeback, nearly erasing the losses from the previous day. Meanwhile, Bitcoin edged closer to the $65k mark, and gold prices shifted, contradicting the previous day’s trend. It’s important to note a discrepancy in the MarketWatch chart numbers above.
Additionally, a notable divergence between the Nasdaq and the 10-year yield has emerged this year, leading to the question:
Which will yield first, the Nasdaq or the bond market?
In today’s financial frolics, stocks took a joyride upwards after the Federal Reserve played it cool, keeping rates parked at a sky-high 23-year peak. Despite this, they’re eyeing a trio of rate cuts by the end of 2024’s calendar pages. The big three indexes didn’t just climb; they set new altitude records, while Small Caps had a blast, rocketing to stellar heights.
The Fed’s crystal ball still forecasts those three rate reductions, but they’re playing hard to get, wanting a peek at more signs that inflation’s taking a chill pill. Before the bigwigs met, the rumor mill churned out fears of inflation’s hot streak leading to fewer rate cuts, but the Fed’s dot plot kept the triple cut dream alive, giving traders and the market’s mood a nice boost. It seems the Fed’s not ready to sober up from the rate-cut party just yet, and for now, the market’s eating it up with a rally spoon.
Powell, the financial oracle, dropped some cryptic clues:
“We’re treading carefully; it’s a coin toss on risks.”
“No decisions today, folks. But we might ease off the money hose soon, as per the grand plan.”
Translation: It’s as clear as a foggy morning in San Francisco.
In a twist, rate-cut bets for 2024 actually went up, sending the dollar on a nosedive and giving gold a high-five with a new shiny record. Bitcoin got back in the game, bouncing over the $65k fence, and the MAG 7 strutted to a record beat, all thanks to bond yields taking a tumble. Crude oil played the rebel, dipping under $82.
Hats off to ZeroHedge for the CPI time-travel chart. So, fellow market watchers, are we strapping in for another inflation rollercoaster ride?
Continue reading…
2. Current “Buy” Cycles (effective 11/21/2023)
Our Trend Tracking Indexes (TTIs) have both crossed their trend lines with enough strength to trigger new “Buy” signals. That means, Tuesday, 11/21/2023, was the official date for these signals.
If you want to follow our strategy, you should first decide how much you want to invest based on your risk tolerance (percentage of allocation). Then, you should check my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report for suitable ETFs to buy.
3. Trend Tracking Indexes (TTIs)
Before Federal Reserve Chairman Powell’s remarks on interest rates, the major stock indexes showed no significant movement. However, after his comments, which leaned more towards a stricter (hawkish) rather than lenient (dovish) stance on interest rates, the markets interpreted this as favorable. Consequently, there was a notable rally, and the markets finished strong.
Similarly, our TTIs also experienced an upswing and ended the day on a higher note.
This is how we closed 3/20/2024:
Domestic TTI: +10.79% above its M/A (prior close +9.84%)—Buy signal effective 11/21/2023.
International TTI: +10.47% above its M/A (prior close +9.70%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
———————————————————-
WOULD YOU LIKE TO HAVE YOUR INVESTMENTS PROFESSIONALLY MANAGED?
Do you have the time to follow our investment plans yourself? If you are a busy professional who would like to have his portfolio managed using our methodology, please contact me directly to get more details.
The S&P 500 ticked upwards today, catching a lift from Nvidia’s big reveal at their AI conference. Wall Street’s attention, however, was split as eyes turned to the Federal Reserve’s two-day policy pow-wow.
Nvidia, the tech world’s darling, nudged up 1% as investors chewed over the news from its GTC Conference. CEO Jensen Huang showcased the new AI chip, Blackwell, claiming it’s a powerhouse compared to its predecessors. With the stock’s year-to-date rally at a whopping 78%, some investors might be tempted to pocket their gains after the big announcement.
Super Micro Computer, the builder of Nvidia’s AI server dreams, saw its shares dip by 9% amid talk of a share offering. Yet, with a 250% surge this year and a recent S&P 500 induction, they’re not exactly down and out.
Inflation’s cautionary tales have traders on edge, pondering if the Fed will play it safe with interest rates. But fed funds futures are betting big (99% big) that rates will stay put this week.
As the Fed wraps up their March meeting, don’t hold your breath for any interest rate drama. The market’s not betting on it, not now, not even at the next meeting.
Oil, dubbed Black Gold, took the day’s top spot, with WTI prices hitting a high note at $84, a peak unseen since the yuletide season. Rate-cut hopes took a tumble, bond yields got cold feet, and bitcoin did a quick dip and recovery. The GBTC’s sudden drop? Just a hiccup.
With the Fed’s upcoming announcement and the market buzzing about no rate cuts in 2024, the question is: will the indexes ride the wave of relief or brace for a splash?
