Global Growth Fears Stop Bullish Momentum

Ulli Market Commentary Contact

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

Right after the opening bell, the major indexes took a dive as a cocktail of global risks kept traders occupied. The usual suspects, namely U.S.-China trade tensions, the U.K Brexit and a sharp slowdown in Chinese growth, combined to put the bulls on notice that all may not be well with this world and south we went.

Considering the strength of the recent bear market rally, the pullback was not significant, however, it could indicate that bearish forces could come into play again. Poor earnings and weak data out of Germany put their markets on a southerly course, as algos and traders desperately looked in vain for positive headlines. Concerns spread that the slowing growth in China has already affected the European Union.

In the end, the pullback was enough to change the position of our Domestic Trend Tacking Index (TTI), which had crawled above its long-term trend 4 days ago. Today’s market drop was sharp enough to push our index back below the line into bear market territory by a tiny margin (section 3). So, we’re on hold and will not take any action until a clear break to the upside has occurred again and is accompanied by some staying power.

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Equities Under Pressure

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
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I guess nothing can ever really satisfy the traders/algos on Wall Street, who constantly need to be fed a fresh dose of stimulus in order to maintain the bullish mood. Apparently, it’s not enough that the Fed threw in the towel by doing a U-turn with their interest rate policy and in the process becoming Wall Street’s lapdog.

So, much was expected from the State of the Union address in terms of new details on the economic agenda or a concrete solution to the China trade disagreements. With no specifics forthcoming, the markets slipped a bit with the major indexes closing in the red by a small margin for the first time in 6 sessions.

Technically speaking, the S&P 500 is facing stiff overhead resistance as it approaches its 200-day M/A. As of today, it’s only 12 points away from cracking this barrier and moving back onto the bullish side. For the second day in a row, the index was unable to make the break.

However, once it conquers that line, it’s not a guarantee that it will be free sailing from then on. As this chart shows (courtesy of Global Market Monitor), the last 3 times this occurred, it turned into a regrettable head fake that head the bears chomping at the bit.

To me, the markets seem out of touch with reality, especially when considering that earnings are one of the main economic drivers that attempt to justify the current lofty levels. Forward earning expectations continue to slip and have now crashed to a 6-month low. Go figure…

Our Trend Tracking Indexes (TTIs) retreaded a tad, but the Domestic one remains above its long-term trend line. A little more staying power is needed, before I will issue a new Domestic ‘Buy’ signal.

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A Whip-Saw Day But Bull Trend Strengthens

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
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One look at the chart tells the story. An early rebound failed miserably with the S&P 500 dipping back into the red, then recovering and closing at the early high of the session. All eyes are now on the 200-day M/A, which today acted as overhead resistance.

At 2,742 we are only some 4 points away from conquering that level, which Wall Street considers to be the return to the bullish theme. Our Domestic TTI has already crossed into bullish territory and, should momentum not change much over the next couple of days, will generate a new ‘Buy’ signal.

If the S&P 500 manages to crawl back above its line, it will have been the fastest V-shape recovery on record considering that only at Christmas the index was hovering in bear market territory, mostly defined as a drop of 20% or more off recent highs.

While this has been the best start to a year for the S&P 500 since 1987, as ZH points out, it has been the worst start for earnings expectations in 3 years. However, be that as it may, I am preparing to re-enter the markets and will post the exact entry date.

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Tech Leads The Way And Posts Solid Gains

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
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Despite a slow start, the major indexes picked up some steam and closed higher with technology leading the charge as the Nasdaq added +1.15%. Assisting the advance was a positive view of Alphabet’s (Google) upcoming quarterly report card and another round of earnings by some 97 members of the S&P 500.

The markets in general continued to benefit from the Fed’s latest dovish signal that interest rate hikes were on hold until further notice. As I posted before, this fact more than any other will contribute to further upward momentum in support of equities. Of course, the continued short-squeeze helped the bullish cause as well.

On deck I see possible additional market support in form of the China trades talks, which so far have been a headwind to equity markets. That could change in a hurry if some verifiable positive headlines about the March 1 deadline (increase in tariffs) show that a solution has been found and accepted by the warring parties.

With today’s action, our leading indicator, the Domestic Trend Tracking Index (TTI), has crawled above its trend line (see section 3) into bullish territory for the first time since 11/15/18. It’s now hovering at +0.36% above the line, and I need to see a little staying power before a new ‘Buy’ signal will be triggered.

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ETFs On The Cutline – Updated Through 02/01/2019

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 111 (last week 84) 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 February 2, 2019

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2019/01/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-01-31-2019/

Up For The Week But Running Out Of Steam For The Day

[Chart courtesy of MarketWatch.com]
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Choppy and sloppy best describes the last trading day, a week during which the major indexes gained but ran out of steam, as an early rally faded into the close with the Dow coming off the high by some 150 points.

Despite the Nasdaq notching a 1.4% rise over the past 5 days, today it was the anchor that kept any advances in check predominantly due to Amazon’s earnings announcement that revenues for the Q1 2019 would fall short of expectations. Amazon’s stock price has now been down for 2 straight weeks.

For this week, the S&P 500 advanced +1.6%, the Dow added +1.3% while the Nasdaq gained +1.4%. All thanks to the Fed’s slamming on the monetary brakes and caving to Wall Street by signaling “patience” regarding any future policy changes as opposed to the more hawkish behavior shown 3 months ago.

Interest rates rose today with the 10-year bond yield gaining 5 basis points to settle at 2.68%. The driving factor here was the jobs reports showing that the U.S. gained 304k jobs vs. 172k expected, the biggest increase in almost a year. Of course, this number is subject to the usual at times sharp revisions. Case in point is the December figure, which was slashed from an initial estimate of 312k to 222k.

Our Domestic Trend Tracking Index (TTI) inched a tad higher and is now within striking distance of crossing its long-term trend line to the upside and into bullish territory. Please see the exact numbers in section 3 below. If the current bullish sentiment continues, we may very well be inching back into equity ETFs in the near future.

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