ETF Tracker Newsletter For October 5, 2018

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2018/10/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-10-04-2018/

SPIKING YIELDS = HEADWIND FOR EQUITIES

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

Summing up the week best, was ZH with this final tally:

  1. Unemployment Rate at 49-year lows
  2. US Stocks – worst 2-day drop since May
  3. Small Caps, Nasdaq – biggest weekly drop in 7 months
  4. Small Caps – biggest 5-week drop since Nov 2016
  5. China (closed) ETF – biggest weekly drop in 7 months
  6. Semis – biggest weekly drop in 6 months
  7. FANGs – biggest weekly drop in 7 months
  8. Homebuilders – worst.losing.streak.ever…
  9. USD Index – best week in 2 months
  10. HY Bonds – biggest weekly price drop in 8 months
  11. IG Bonds – biggest weekly drop since Nov 2016
  12. Treasury Yields – biggest weekly yield spike in 8 months
  13. Yield Curve – biggest weekly steepening in 8 months
  14. Gold – best weekly gain in 6 weeks

The market slump continued with Homebuilders, SmallCaps, Nasdaq, the FANGs and Semiconductors all getting hammered to varying degrees with SmallCaps being the worst performer closely followed by the Nasdaq. To no surprise, the VIX spiked to over 17, a level which we have not seen since June.

The jobs report missed, as only 134k jobs were added vs. expectations of 185k. That was not too much of a surprise, as the hurricane had a major impact with 229k people not being at work due to bad weather. Offsetting this September weakness was the August upward revision from 201k to 270k.

The unemployment rate ticked lower to 3.7%, its lowest level in 48 years. More importantly, wages were rising 0.3% on the month or 2.8% on the year which, when combined with the low unemployment rate, created worries about inflationary impacts.

That in turn sent bond yields on another rally with the 10-year spiking to 3.24% intra-day before closing at 3.23%, a gain of almost 5 basis points. If this trend continues, equities are in for a major surprise during this already ‘red’ October, as rising yields will eventually spell the end of the bullish environment.

This may be just the beginning but, despite prevailing international weakness, the major trend in the domestic arena remains bullish for the time being.

Read More

Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 10/04/2018

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, October 4, 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 +3.54% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

Read More

Yield Shock Takes Down Markets As The Bond Slaughter Continues

Ulli Market Commentary Contact

 

 

 

 

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

The was no question as to what the driver was to pull the markets down in no uncertain terms. As I cautioned just yesterday, surging bond yields will affect markets eventually, and that moment arrived today as the 10-year yield catapulted towards the 3.23% level, but it eventually settled at 3.19% up 3 basis points from yesterday’s close.

The major indexes slumped with the Dow at one point being down 357 points, or 1.3%, but buying set in and some of the mid-day losses were reversed. Nevertheless, red was the color of the day with the Nasdaq experiencing the brunt of the sell-off with -1.81%.

The spike in bond yields may not be over and “stock markets are entering the danger zone,” according to Bloomberg. What that means is that stocks can only handle yields rising to a certain point before being adversely affected. No one knows where that level is, but I think we’ll be soon finding out that moment of truth should bond yields rise further.

With the Nasdaq slumping the most, it comes as no surprise that the FANG stocks were hammered—not just today, but since the beginning of the month. Semiconductors followed suit with SMH dropping -2.25% and closing below its 5-month uptrend line. In the meantime, the US Dollar did a dump-and-pump and closed higher on the day.

Again, bond investors saw the widely held TLT lose another -0.71% and not just making a new low for 2018 but also increasing the YTD loss to -9.48%. Ouch!

Read More

Equities See-Saw; Bonds Get Slaughtered

Ulli Market Commentary Contact

 

 

 

 

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

As we’ve seen in the recent past, an early rally ran into overhead resistance, as prices slipped for the remainder of the session. However, the major indexes were able to close in the green by a fraction of a percent as the Dow scored another intra-day record.

The turnaround came early afternoon when bond yields suddenly rallied strongly with the 10-year spiking 9 basis points to close at 3.16%, its highest level since June 2011, while all other maturities rallied in similar fashion. That turned out to be the kill shot for equities and south we went. Fortunately, we ran out of trading time before breaking the unchanged line to the downside.

The widely held 20-year bond ETF (TLT) got clobbered, as it not only traded in a wide range but also gapped down as the chart shows. YTD, TLT has now lost -7.88%, a hefty amount given the more subdued nature of bonds over the past bullish cycle, which appears to slowly come to an end. With today’s loss, TLT has taken out the May’s lows and has reached its lowest level for 2018.

SmallCaps managed to buck the trend and rebounded with SCHA gaining +0.78%. The Dollar Index surged along with the higher bond yields to a level last seen in early August, while Italy’s bond yield eased on hopes that negotiations regarding future deficits may turn out to be successful.

I keep harping on bonds, because higher bond yields will eventually end the stock market euphoria and ultimately push the bullish crowd over the edge into the bear market trap. However, we are not at this point yet, so take my view just as a word of caution.

Read More

Dow Scores 14th Record This Year; Smallcaps Collapse

Ulli Market Commentary Contact

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

While the Dow managed to score not only a green close but also its 14th record of 2018, the S&P 500 and Nasdaq were the weaklings of the session and slipped slightly below their respective unchanged lines.

In other parts of the world, the activity was more bearish as the China ETF FXI lost -2.42%, despite China markets being closed for the “golden week.” In Italy, the country with the worst NPL loans as I pointed out yesterday, the markets went haywire by first diving sharply, after which panic buying ensured, which brought the price back to unchanged, as this chart from ZH shows. It’s odd and certainly not the sign of a healthy and sound environment when erratic moves like this occur.

While the Dow was enjoying its rise to a new record, the same can’t be said for SmallCaps (SCHA), which got spanked again after having broken a major support line, which had been in place since April. The 200-day M/A looks to be in striking distance now, and it would not surprise me to see this sector move into bear market territory.

Looking at it a different way, there is a major divergence between the Dow and the SmallCaps, which simply translates to the former outperforming the latter by a wide margin. As the chart shows, this divergence just came into play around the beginning of July.

What that means is that some sectors have rolled over and upward momentum is no longer broad based as you can see here. Big caps are holding up well, which is why I increased our exposure to them back in August. We’ll have to wait and see if this weakness will spread to other areas as well. It’s too early to tell, if Small- and MidCaps are resembling the proverbial canary in the coalmine.

Read More

U.S.-Canada NAFTA Deal Propels Markets

Ulli Market Commentary Contact

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

Right after the opening bells, the major indexes went into rally mode, as news of a surprise U.S.-Canada new NAFTA trade agreement pushed the S&P 500 within shouting distance of its intraday record. Finally, some good news on trade after months of haggling and infighting within the various parties.

The euphoric mood waned somewhat throughout the session with the Nasdaq giving back all early gains and slipping below its unchanged line, but the Dow and S&P, despite coming off their early highs, saved the day by closing in the green. But, SmallCaps had their worst day in over two months, so the rally was anything but broad.

Emerging markets were back in the spotlight, as not just the strong US dollar is wreaking havoc with their currencies but also a toxic mix of global tensions, rising US interest rates and now surging oil prices contribute to the overall misery. Take a look at this chart, which shows the YTD percentage change in oil prices in the various regions. Ouch!

India moved to center stage by announcing that it nationalized one of their banks caused by a surge in NPLs (non-performing loans), an unprecedented move that some analysts have put in the “panic” category. Of course, it’s well known that the leader of NPLs is Italy, which is in the middle of a collapsing banking system. But how do those two compare to the rest of the world? This chart below gives us the answer:

Read More