ETF Tracker Newsletter For June 8, 2018

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2018/06/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-06-07-2018/

 [Chart courtesy of MarketWatch.com]

  1. Moving the markets

Despite a weak opening, the major indexes managed to gain some footing and climb above the unchanged line to close in the green. This performance was their strongest week in a quarter assisted by the biggest short squeeze in 4 months along with a low VIX.

Since the start of April, according to ZeroHedge, the “most shorted stocks” have dramatically outperformed the S&P 500, while the FANG stocks traded leadership roles with the financials.

I recently referred to this as climbing a wall of worry and today was no different, as tensions between the U.S. and their major allies escalated ahead of this weekend’s G7 meeting in Canada.

I was not surprised to hear that the disparity in views is so stark that this gettogether has also been referred to as G6+1. It’s politics of pretense with one author quipping “The status quo is the problem, but it can’t be touched.”

Bond yields had a wild week of their own with the 10-year attempting to break through the 3% level, but it fell short as a flash-crash pushed yields sharply lower. In the end, we closed at 2.93%, unchanged from yesterday.

The focus right now will be on the G6+1 meeting with anxiety being high to see if any agreements can be reached. If not, there is hope that at least a joint statement will make headlines.

Next week, it will be business as usual with Italian/Argentinian banking issues, along with Deutsche Bank’s attempt to find a lifeline, being front and center.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 06/07/2018

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, June 7, 2018

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 4/4/2016

Click on chart to enlarge

Our main directional indicator, the Domestic Trend Tracking Index (TTI-green line in the above chart) is positioned above its long-term trend line (red) by +2.68% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Tech Tumbles And Bond Yields Flash-Crash

Ulli Market Commentary Contact

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

After the 4-day winning streak, we saw a slight pullback in the major indexes, especially in the tech sector, with the Nasdaq giving back a modest -0.70%.  However, the main action happened in the bond market.

Following the recent rise in yields towards the psychologically important 3% level, for the 10-year bond, the rally turned around suddenly with yields flash-crashing 10-12 basis points, as this chart shows. That’s a huge move forcing those with short positions to run for cover.

With Italy being out of the limelight today, Brazil took its place in the spotlight. Turmoil best describes the events of the day, with the Brazilian Real crashing to a new low as a $3 billion-dollar intervention failed to prop up markets. It sure looked like there was an “unmistakable relationship between the timing of the Real’s plunge and the collapse in Treasury yields,” according to ZeroHedge.

There are so many hotspots in the world right now with any of them being able to affect markets worldwide. It’s somewhat surprising that the major indexes continue to climb a wall worry, in the process ignoring any theme that can’t be interpreted as bullish.

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Euphoria Rules Again

Ulli Market Commentary Contact

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

After an early morning pullback, the floodgates opened with buyers appearing in full force and pushing the major indexes higher with the Nasdaq closing at another record, while the Dow sported its best day in almost 2 months.

Since there were no news to justify the run-up, the VIX was pushed down to an 11 handle thereby throwing a solid assist to keep the bullish movement going. Remember, a lower VIX supports equities and vice versa. On the other hand, this reckless exuberance is not shared by those who allegedly know best, namely the Smart Money. This chart makes that abundantly clear.

Despite the Nasdaq’s solid performance (+0.67%), the Financials did even better with XLF adding +1.86%. A higher 10-year bond yield boosted that sector along with encouraging remarks from the ECB regarding them being on track to end their asset purchases.

The ongoing trade battle, Italian political and banking tensions along with Deutsche Bank’s financial issues were pretty much ignored, as the bulls continued to have it their way for the 4th day straight day.

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No Market Report Today

Ulli Uncategorized Contact

Due to a variety of business commitments, I won’t be able to write today’s market report. Regular posting will resume tomorrow afternoon.

Ulli…

Treasury Yields Rise—Stocks Follow Suit

Ulli Market Commentary Contact

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

Markets behaved today as if a world of worry had simply disappeared. Still on a positive high from Friday’s jobs reports, upward momentum led to another green session for the major indexes. The main driver was the tech sector, which posted its first record close since the middle of March.

None of the weekend news seemed to matter, or were simply ignored, as trade talks between U.S. and China broke down, and a host of European finance ministers paraded around to express disappointment over Trump’s decision to burden the major allies with stiff tariffs.

Spiking interest rates did not matter as the 10-year bond yield jumped 5 basis points to close at 2.94%. Never mind that factory orders slumped -0.8% and had their worst April since 2012. While the March number was upwardly revised, year over year the growth trend slowed down.

Today was all about exposure to risk assets and focus on the upcoming Central Bank meeting next week, where a rate hike is pretty much a foregone conclusion. The main debate remains whether or not the Fed will hold off with a fourth increase this year.

Historically June is usually not a good month for equities. Over the past 2 decades, June has been the fourth-worst month of the year for the Dow and S&P 500. We’ll have to see if it’s different this time.

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