Treading Water As The 4-Day Win Streak Ends

Ulli Market Commentary Contact

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

The major indexes hugged the unchanged line for most of the day but were not able to remain above it at closing. The exception was the Nasdaq, which managed to notch another positive session.

The Dow’s and S&P’s pullbacks were modest and influenced by the Fed’s decision to maintain its hawkish stance. The released minutes indicate that if economic data points stay strong “it would likely soon be appropriate to take another step in removing policy accommodation.” Translation: Our planned rate hikes remain on track.

However, they issued one disclaimer in stating that “any tightening will have to pause if the US trade tensions with partners continue to escalate.” So, there you have it. Nothing has changed from the prior meeting, and they will act according to their interpretation of the events as they unfold.

Overall, the markets have managed to overcome some of the obstacles in the recent months, namely the back and forth tug-of-war with our various trading partners, which so far have not affected the earnings season. Now, the latest debacle has surfaced in the form of a possible legal drama surrounding Trump and his personal attorney, a saga which is sure to be regurgitated over and over my MSM, but it’s not clear if it will have any impact on equities.

The US Dollar’s trend reversal continued as it dipped to its lowest level in 2 weeks, while interest rates dropped with the 10-year yield slipping 3 basis points to end at 2.82%. However, over the past 2 weeks bonds have decoupled from stocks as this chart shows. We will have to wait and see who is right…

Looking at the big picture is economist David Rosenberg, who summed things up like this:

“With the sub-par resale home sale report, the running tally so far this month shows 12 data-points missing consensus views to the downside; 5 beating; and 3 in-line. If that characterizes a strong economy, I’d be interested to see what a weak one looks like.”

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Gathering Steam

Ulli Market Commentary Contact

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

The rally gathered steam and continued for the fourth straight day despite some weakness setting in towards the end of the session. I guess it was a case of the nerves not only due the S&P 500 notching an intra-day record but also gaining on the day when stocks tied the record for longest bull market in history, according to MarketWatch. The Russell 2000 and the Dow transports set records as well.

Despite Trump’s rhetoric to the contrary, optimism still prevails that the US/China trade dispute will be resolved amicably, which has been a supporting factor for equities along with solid corporate earnings.

With earnings season just about being over, a new focal point is needed to provide the ammo for further market advances. With no essential economic data on deck, that focus has been on the Fed, which will release the minutes from their latest meeting tomorrow around lunchtime.

This is followed by a speech from Fed head Powell on Friday, where much hope is put on clarification of some of the potential market headwinds, such as impact of current trade policy, plans for further rate hikes, and the effect of the Turkish currency crises on other emerging markets.

As I am writing this, Trump’s personal lawyer Michael Cohen pleaded guilty to a variety of charges. The futures markets were modestly affected with the major indexes currently giving back some of today’s gains. I don’t think this will be much of a market moving affair, but you can never be sure until we see how this plays out tomorrow.

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3rd Up Day In A Row

Ulli Market Commentary Contact

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

Sentiment was predominantly bullish with the major indexes scoring another winning session supported by a couple of billion-dollar mergers. At the same time, optimism reigned supreme that a solution will be found to bring the trade-tug-of-war between the US and China to a mutually acceptable conclusion.

As the WSJ reported Friday, negotiators are mapping out talks with the aim to have a resolution in place by November. If this comes to pass, a lot of market uncertainty would be removed, which would increase the odds of renewed strength in the equity markets. On the other hand, Trump just announced that he “does not anticipate much progress from the trade talks” and “there was not timeframe” for ending the dispute.

Right now, however, the reality looks quite different in that 25% tariffs on $16 billion of Chinese imports will be implemented later this week. That for sure will provoke a retaliatory move from China.

Outside the US, the events in Turkey continue to be troubling, as the lira and the stock market have been hammered and high inflation, political instability and debt, along with potential contagion, remain a constant focal point for global investors.

Bond bears were the ones that suffered some losses today, as yields weakened, and bonds rallied. The 10-year lost 5 basis points to close at 2.82%, its lowest since the end of May. It’s not clear yet if that was the result of reports announcing that Trump accused the Fed of not being dovish enough.

On deck for this Wednesday is the release of the minutes from the Fed’s most recent meeting. Every word will be scrutinized to gain insight into the path of intended interest rate policy over the remainder of the year.

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ETFs On The Cutline – Updated Through 08/17/2018

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 366 High Volume ETFs ETFs, defined as those with an average daily volume of more than $5 million, of which currently 162 (last week 165) 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 August 17, 2018

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2018/08/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-08-16-2018/

TRADE TALK OPTIMISM CONTINUES

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

While we were off to a slow start, market direction changed in a hurry on continued optimism over the upcoming trade talks with China pushing the major indexes in the green for the second straight day. The Nasdaq lagged while the Dow closed at its highest since February.

The upcoming trade talks with China were reinforced by optimism that a mutually beneficial solution will eventually be found, which proved to be again the force that supported upward market momentum. Especially, news of a road map to reach a deal that could lead to a summit between Trump and Xi Jinpin later this year helped the positive sentiment.

Putting a bit of a downer on the mood on Wall Street were the latest headlines from Turkey, as their currency headed south again at the tune of 4%. It appears that the story is far from being over and will continue to create market headwinds, the severity of which will depend on the magnitude of the events.

Not helping matters was Moody’s, which joined S&P and Fitch in downgrading Turkey’s long-term foreign debt rating to Ba3 from Ba2 and shifting their outlook to “negative” from “watch negative.” Then S&P unleashed the truth by forecasting “a recession next year. Inflation will peak at 22% over the next 4 months, before subsiding to below 20% by mid-2019.” Ouch!

Despite global turmoil in the markets, with global stocks being down 14% from their all-time highs in January, US equities have been dominating YTD as this chart shows. That means we are still the cleanest dirty shirt in the dirty laundry basket, which to me begs the question is “how long can we remain isolated?”

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 08/16/2018

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, August 16, 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 +2.57% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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