1. Moving the markets

There was no rebound in sight anywhere, as the major indexes opened below their respective unchanged lines, headed south and bounced around the day’s lows without ever threatening the downward momentum.

The S&P 500 has now lost 9 out of the past 11 trading days and closed today right at its 200-day M/A. That leaves open the question as to whether this level will again serve as a springboard for further advances or will simply be a momentary resting place before the index dives into bear market territory.

The Dow was off some 450 points at its low, as worries about interest rates and global growth took center stage and removed any bullish sentiment. For sure, this move ended Tuesday’s epic short squeeze, which was declared the biggest one since election day and which has now gone through a total reversal.

It all started with Chinese equites doing their best interpretation of a swan dive with the Yuan joining the party. For background, the Chinese markets have been nothing short of a bloodbath this year with their equivalent of the ‘Nasdaq’ having lost some -35% YTD. Taking a clue from China, Europe followed suit with their indexes not only sinking for the session but diving into the close.

As ZH, pointed out, bond yields spiked yesterday to catch up with stocks, then recoupled and fell today in sync with equities. YTD, 10-year yield has come off its highs, at least for the time being, while the US dollar continues to hover in its trading range, although at the high end.

What could spark a sudden rebound in equities?

While a surprisingly strong earnings season may rank at the top of the list, another reason could be the ending of the blackout period companies have put in place that limits trading from a few weeks before earnings are released until shortly thereafter. Whether these two possibilities are enough to overcome weak economic data and lack of global growth remains to be seen.

Our Trend Tracking Indexes (TTI) continue to support the bearish theme, as you can see in section 3.

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1. Moving the markets

A sharp early dive pushed the Dow down some 250 points (thanks in part due to IBMs poor earnings report) shortly after the opening with the other major indexes seeing red numbers as well. A slow but steady recovery pulled the indexes back above their respective unchanged lines, but the gains did not hold, and we closed slightly down, a remarkable achievement given the lousy start to the session.

Throwing some cold water on the rebound was the release of the Fed minutes showing that most policy makers support the fact that interest rate hikes should continue to be implemented. Consequently, the 10-year bond yield jumped 2.5 basis points to close at 3.19%.

Economic numbers were disappointing to say the least, with the housing market showing weakness all the way around. Mortgage applications collapsed to 18-year lows, mostly due to 30-year fixed rates now exceeding 5%. Housing Starts resumed their September collapse by slumping 5.3%, while Permits disappointed because of a 18.9% breakdown in the MidWest.

Still, the markets managed to overcome the hawkish Fed minutes and poor data, but caution was the theme on Wall Street today, since volatility looks to stay with us as witnessed by this morning’s market breakdown. The positive is that most players on Wall Street still see a strong earnings season ahead supporting the bullish mood.

Regarding domestic major trend direction, we’re still stuck in the neutral zone.  Our Domestic TTI (see section 3 below) slipped a tad but is stilling hanging on to the bullish side of the trend line by a scant +0.06%, which is hardly a position conducive to support either the bulls or the bears.

We will hold on and wait for more directional clarification and, depending on the outcome, will either add to current holdings or move all the way to cash. Right now, patience is the key to avoid any unnecessary whip-saw signals.

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1. Moving the markets

Forget yesterday’s ugly close, during which the major indexes got stuck below their respective 200-day M/As indicating more pain to come on the downside. Today was a new day, where the bulls ruled for the entire session, as an upbeat earnings mood and some decent economic data (US job openings, industrial production) wiped out any bearish concerns.

At least for this session, the widely watched 200-day M/As served as a springboard to pull the indexes (except SmallCaps) out of the doldrums and back into bullish territory. While one day does not make a trend, if there is more upside follow through, we may see a resumption of the bullish theme.

Let’s not forget that the S&P 500 had dropped sharply during last seven sessions and the Dow slipped heavily in the last four out of five, pushing our Trend Tracking Indexes (TTIs) into bear territory with the Domestic one closing below its trend line, however, without having had a chance to show any staying power. That fact prompted me to unload only a portion of our domestic holdings, while waiting for more downside confirmation.

If today is any indication, we may have experienced a whip-saw signal in the domestic arena assuming this was not a one-and-done event followed by a resumption of the recent slide and volatility. If there is some stability in the making, I will again increase our current exposure to the domestic market.

Of course, market manipulation is our constant companion and today’s assist came from the fact that today was the biggest short-squeeze day since November 2016’s post Trump election rebound, according to ZH. That violent ricochet feeds on itself as constantly rising prices force more shorts into covering their positions creating more and more buying power to propel the markets higher.

Still, for October, red remains the dominant color, and we’ll have to wait and see if this optimistic rebound has legs, with earning season just dead ahead, or will simply fade away.

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1. Moving the markets

Traders were a nervous bunch today after the S&P 500 bounced off the lows last Friday and came to rest right on top of its 200-day M/A, which for many represents the dividing line between bullish and bearish territory.

Our Domestic Trend Tracking Index (TTI) already dipped below its own trend line last Thursday generating the signal to exit “broadly diversified domestic equity ETFs.” We eliminated most but are still holding some positions to not get caught in a whip-saw signal. These are slated to be sold as well as soon as I see more downside confirmation.

Today’s session did not offer much of a clue as to future market direction, since the major indexes clung to their respective unchanged lines. However, during the last 30 minutes, the bears appeared to have been unleashed (via Saudi headlines) and pushed the indexes clearly below the day’s trading range and the S&P 500 below its 200-day M/A where it closed for the 2^nd time out of the past 3 days.

Looking at this S&P 500 chart, it appears that the bearish momentum has the upper hand for the time being.

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ETF Tracker StatSheet

https://theetfbully.com/2018/10/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-10-11-2018/

ENDING THE WEEK WITH PUMP, DUMP AND PUMP

1. Moving the markets

Today turned into another wild ride with the major indexes rebounding, then dropping, with the Dow turning negative after an early 400-point gain, after which buyers stepped in to pull equities out of the doldrums. In the end, we saw one of the worst weeks for stocks since March with the Dow surrendering -5.1%, while the S&P 500 and Nasdaq gave back -4.9% and -4.8% respectively.

That kind of week was enough to send both of our Trend Tracking Indexes (TTIs) into bear market territory and generating “Sell” signals as posted. The International one is stuck deeply on the bearish side of its trend line. The decline was broad based, as shown in Thursday’s StatSheet, where only red numbers can be seen in the International ETF section confirming my current stance to not be invested in that arena.

Domestically, as I posted yesterday, I liquidated the bulk of our positions. The remainder was scheduled for today, but I held off as I saw the rebound in the making. Nevertheless, our Domestic TTI remains in bear market territory with the Nasdaq being at the precipice of a correction, which is defined as a drop of 10% from recent highs.

Today’s earnings for the banking sector were mixed at best, leaving the Financials (XLF) in no man’s land as far as trend direction is concerned. It remains to be seen if the upcoming earnings season can provide enough ammunition to pull these markets out of the dumps.

Given the still lofty valuations, and the rise in corporate borrowing costs due to higher yields, it becomes questionable in my mind whether bull market momentum can be sustained. Again, it appears that the US markets are finally catching down to the rest of the world in regard to equity performance.

ZH simply called this month carnage when reviewing these stats:

1. Nasdaq 100 is on course for the worst month since November 2008
2. Small Caps are on course for the worst month since September 2011
3. S&P is on course for the worst month since August 2015 (China Devaluation)

Looking at the big picture, we must consider the possibility that this bearish momentum could continue, of course, not in a straight line but interrupted by hopeful bounces. If so, we will liquidate our remaining holdings as this picture becomes clearer.

If, on the other hand, this rebound is strong enough to support the bulls, then we will add to our current holdings once our Domestic TTI has crossed its trend line to the upside again. At all times, we must keep our main goal in mind, which is avoiding participating in portfolio disasters like we saw in 2000 and 2008.

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