Anticipation Of Good Earning Catapults The Major Indexes

Ulli Market Commentary Contact

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

Yesterday’s worries about China’s lack of interest in purchasing US Treasuries are now a thing of the past while other concerns, such as jobless claims and wholesale inflation data, were simply ignored in anticipation of a hopefully great earnings season, which is expected to be the catalyst to drive the markets to new highs.

So, up we went right after the opening bell, never looked back, and the major indexes, actually accelerated into the close setting new all-time highs across the board. Yes, even the YTD lagging SmallCaps participated. Surprisingly, all this happened with the VIX rising and testing the 10 level.

Showing strong leadership in our ETF space were Transportations (IYT) with an impressive +2.37% gain, which made it not only its 8th up day in a row but also its best start to a year since 2001. Taking second and third place were SmallCaps (SCHA +1.62%) and MidCaps (SCHM +1.14%). Lagging the bunch were Semiconductors (SMH) with +0.47%.

Treasury yields reversed from their recent rally with the 10-year yield giving back 1 basis point to 2.54%, while the 30-year auction attracted a lot of interest contributing to the lower yield scenario. The US Dollar (UUP) was not so lucky and plunged -0.42% and is now in danger of taking out the lows made earlier this year.

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Logging The First Down Day Of The Year

Ulli Market Commentary Contact

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

I had to happen eventually and today was the day. The major indexes actually traded below the unchanged line all day, staged a comeback but ended slightly in the red, as some profit taking set in. Caution prevailed as yesterday’s bond slam-fest remained on traders’ minds. The cause of jumping bond yields were reports out of China that they are considering “slowing or halting” purchases of U.S. debt, an event that would definitely accelerate a rise in yields.

With the markets going nowhere, that theme carried over to the ETF space as well, where losers outnumbered gainers. Actually, the only ETFs in our stable of holdings ending in the green were Financials (XLF +0.84%) and Transportations (IYT +0.10%). All others retreated led by the winner YTD, namely Semiconductors (SMH -1.32%), followed by Emerging Markets (SCHE -0.48%) and MidCaps (SCHM -0.35%).

Intra-day, the yield of the 10-year bond climbed another 4 basis points before backing up and ending unchanged at 2.55%. The more interest rate sensitive high-yield arena (HYG) suffered for the second day in a row and closed lower by -0.22%. The US Dollar (UUP) slumped after 3 days straight of gains and lost -0.25%.

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Dow Continues Record Setting Pace; Bonds Get Clobbered

Ulli Market Commentary Contact

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

Thanks to Boeing, which added more than 60 points to the Dow, the index set another record while the S&P 500 and Nasdaq gained for the 6th straight day. There was no particular driver for the advance other than continued market optimism.

In our ETF space, winners outpaced losers by a small margin. Financials (XLF) added +0.78%, thanks to the surge in interest rates, with Aerospace & Defense (ITA +0.64%) taking second place. On the downside, Semiconductors (SMH) struggled and gave back -0.94% followed by SmallCaps (SCHA) with -0.10%.

Things were not so calm in bond land, as the 10-year yield jumped 6 basis points to close at +2.55%, which is the highest yield since December of 2016, shortly after Trump’s election. That did not bode well for the 20-year bond ETF (TLT), which gapped down and dove -1.34% to reach a level last seen in the middle of last December. Interest rates will be key to the continuation of the bull market in equities, with a danger point lurking once the 3% level (10-year bond yield) gets broken to the upside.

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A Big Day For The Bulls

Ulli Market Commentary Contact

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

This is the time of the year when market historians come out and use the first five trading days of the year to compare it to the past and then project the results out for the remainder of 2018. Today was no different, and these are the results as translated by ZH:

Thanks to today’s gains, the S&P 500 is up 2.5% – doubling the gains in gold – as bonds are suffering so far…which means, as Ryan Detrick notes, “since 1950, when the first 5 days are up over 2%, the S&P 500 is higher for the year 15 out of 15 times with an average return of +18.6%. “

Unless, of course, this time is different!

Be that as it may, two of the three major indexes eked out another gain while the Dow struggled and fell short reaching the unchanged line. In ETF space, we saw predominantly gains with only International SmallCaps (SCHC -0.13%), Financials (XLF -0.14%) and International Equities (SCHF -0.06%) surrendering a fraction of a percent. On the positive side, Transportations (IYT) led with +0.81%, followed by Semiconductors (SMH +0.69%) and Aerospace & Defense (ITA +0.60%).

The yield on the 10-year bond rose 2 basis points to 2.49%, its highest level since March 2017 and is now honing in on last year’s high. The US Dollar Index (UUP) showed signs of life by gaining +0.46%, its best bounce in 3 weeks.

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ETFs On The Cutline – Updated Through 01/05/2018

Ulli ETFs on the Cutline Contact

Below please find the latest High Volume ETFs 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 255 (last week 239) 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 January 5, 2018

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2018/01/weekly-statsheet-etf-tracker-newsletter-updated-01-04-2018/

 EXTENDING THE RALLY

 

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

Who cares what the news headlines say or that the just released jobs report was downright dismal. This year, anything appears to be bullish for the markets—so far. The major indexes posted record gains again for the 4th straight positive session in part supported by the tax package and a favorable outlook on earnings.

ZH summed up the week as follows:

  1. Record highs for S&P, Dow, and Nasdaq.
  2. Lowest VIX close ever.
  3. First time VIX has ever traded at or below 9.00 for 3 straight days ever.
  4. Nasdaq’s best start to a year since 2004.
  5. Near record streak for stocks to remain within 5% of all-time high ever.
  6. Individual investors’ highest stock exposure since 2000.
  7. Fastest yield curve flattening since 2007.
  8. Longest streak of complacency for risk ever.
  9. Longest winning streak for gold ever.
  10. Longest winning streak for global commodities ever.

As we’ve seen all week, after the opening bell rang, equities jumped higher and never looked back going up in pretty much a straight line. Our ETF candidates followed suit and rewarded us with another profitable session.

Leading the charge today was a tie with Aerospace & Defense (ITA) and Emerging Markets (SCHE) taking top honors with a gain +0.90% each. They were followed by Semiconductors (SMH +0.65%), Large Caps (SCHX +0.63%) and the Dividend ETF (SCHD +0.62%).

Interest rates rose a tad pushing the 20-year bond lower by -0.29%. Gold stayed about even, and the US Dollar (UUP) halted its losing trend by managing to eke out a tiny gain of +0.08%, which appears to be merely a temporary break on its way down to take out the 2017 lows made in September.

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