No Trade Deal, But A Ceasefire Propels Equities

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The much-awaited trade deal did not happen, but markets were relieved that the situation did not worsen. In fact, Trump and his counterpart Xi agreed to resume talks that had ended in May.

Both sides gave a little with Trump lifting some restrictions on telecom giant Huawei to conduct business with U.S. companies, and he will not impose additional tariffs. Xi agreed to buy more U.S. agricultural products with details forthcoming.

That was it! The markets took it as a positive at first, but cooler heads prevailed, and the early spike gave way to a session long slide until the last hour when buyers emerged to push the major indexes higher.

In the end, the trade truce did very little to indicate that a resolution to the conflict is imminent, which means traders will have to live with continuous uncertainty.

This also means that we may need another propellant to fuel further equity rallies, and I am not sure whether the current low bond yields, even if they are dropped further, can improve the current global growth outlook.

After all, we’ve seen a seemingly never-ending stretch of economic data disappointments now for several months, which should entice the Fed to please the markets again later in July. The question is “will another reduction in rates have the desired effect of pumping up the domestic economy—or the markets?”

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ETFs On The Cutline – Updated Through 06/28/2019

Ulli ETFs on the Cutline Contact

Below, please find the latest High-Volume ETF Cutline report, which shows how far above or below their respective long-term trend lines (39-week SMA) my currently tracked ETFs are positioned.

This report covers the HV ETF Master List from Thursday’s StatSheet and includes 322 High Volume ETFs, defined as those with an average daily volume of more than $5 million, of which currently 276 (last week 267) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line (%M/A) from those that have dropped below it.

Take a look:                                                                   

The HV ETF Master Cutline Report

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms. If you missed the original post about the Cutline approach, you can read it here.      

ETF Tracker Newsletter For June 28, 2019

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

EDGING HIGHER ON HOPE FOR U.S.-CHINA TRADE PROGRESS

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

While the major indexes traded above their respective unchanged lines throughout the session, a late push higher appeared to put an exclamation mark at the end of the day, as if to imply that the U.S.-China talks better result in a positive outcome.

Still, the gains were modest, as traders are anxiously awaiting tomorrow’s meeting between Trump and Xi in Japan as part of the G-20 powwow. With threats and conditions having been thrown back and forth, I don’t see much headway being made. After all, for Trump to declare that he made the best trade deal ever, the Chinese would have to admit defeat, and that is not going to happen.

In the end, the month of June proved to be the “comeback” month of the year with the S&P 500 gaining some +6.87%, its best performance since 1955. While that sounds great on the surface, let’s not forget that the index lost -6.59% in May. In other words, we’re about back to where we were on April 30th, namely 2,946 vs. today’s close of 2,941.

Looking at a bigger time frame, like the past 17 months, we see in the following chart that the S&P 500 peaked at 2,873 in February 2018 and closed today at 2,941. That is a jaw dropping return of +2.37%:

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 06/27/2019

Ulli Uncategorized Contact

ETF Data updated through Thursday, June 27, 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 +5.37% after having generated a new Domestic “Buy” signal effective 2/13/19 as posted.

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Bad News Keep Markets Elevated—Hope Prevails Of A 0.5% July Rate Cut

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Boeing put a dent into the Dow’s performance today, which lagged as a result of news that the 737 MAX airplane has a “glitch” that could send it into an “uncontrollable” nosedive. That sent the shares tumbling early on, but they ended up stabilizing and finishing with a minor loss of some -2.5%.

The other two major indexes managed to close in the green with the S&P 500 finally rising after four days of declines. Still, the index is on track to have its best month since January, after the rout in May during which it tanked -6.6%.

Throughout the session, the Nasdaq and S&P managed to hold steady, despite more shaky economic news. We learned that Pending Home Sales on a YoY basis contracted by -0.8% despite lower mortgage rates, but they surprised to the upside in May (+1.1%).

In the automobile sector, the ‘carmageddon’ continues with Ford announcing some 12,000 layoffs at various manufacturing plants in Europe. This is part of a massive cost cutting plan that would also shutter 6 of its 24 facilities by the end of 2000.  

Here in the US, traders are nervously awaiting the outcome of the G-20 meeting, mainly regarding a possible trade deal with China, as the jawboning between the warring parties has shifted into high gear.

It’s a different day, but the same old threats of pre-conditions and additional tariffs. We’ll find out initial market reaction on Sunday night, when the futures markets open.

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China Trade Deal Optimism Turns Into A False Alarm

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

1. Moving the markets

I had to laugh this morning, when I saw the early market spike explained as having been a grammatical error. According to an early CNBC headline saying that Treasury Secretary Mnuchin said a trade deal “IS” 90% complete, and repeated by Bloomberg, pushed the computer algos into buying mode.

As it turned out, CNBC made an error, because instead of saying “is,” Mnuchin was actually using the past tense and said that we “were” about 90% on the way to a China trade deal. Ouch! Therefore, the early buying spree turned into a false alarm with the algos back peddling and the market slipping and sliding into the close.

In the end, not much was gained, expect the Nasdaq closed in the green, thanks to a 14% pop in Micron stock.

Not helping matters was a sudden jump in bond yields with the 10-year gaining 6 basis points to close back above the 2% level. As a result, the low volatility ETF SPLV, which we own, had a down day, but it remains ahead of SPY for this domestic ‘Buy’ cycle.

With the widely anticipated G-20 meeting on deck for this weekend, I expect market direction to be predominantly sideways for the next couple of days. For sure, we’re bound to see more clarity this coming Monday.

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