Soothing Trade-War Fears Propel Equities

Ulli Market Commentary Contact

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

Unlike yesterday, when an early rally petered out, today’s sharply higher opening turned out to be the real thing, as equities maintained their upward momentum throughout the session and into the close, thereby scoring some solid gains across the board.

Giving the assist were Chinese President Xi Jinping’s suggestions to adopt a less-aggressive stance in regards to trade, which were exactly the words the markets were dying to hear, and off to the races we went. Headlines about trade issues between the two countries have been the biggest market influencer as of late driving stock markets sharply lower as well as contributing to massive rebounds.

Today’s gains were broad with 9 of the 11 S&P sectors closing green as Energy (+3.3%) and tech (+2.5%) occupied the top spots. The major indexes also managed to close up for 5 out of the last 6 sessions.

Apparently, there was nothing on the horizon to stop today’s market exuberance from spreading, as even Zuckerberg’s testimony in front of Congress was interpreted as positive with FB rallying +4.5% on the day. Yesterday’s fly in the ointment, namely the FBI’s raid on Trump’s personal lawyer, had no effect on market momentum.

While trade jawboning is sure to go on for months, and keep a cloud of uncertainty over the markets, I think that a less hard-nosed and more cooperative spirit will keep volatility in check unless, of course, sudden other hot spots take over the game of headline ping pong.

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A Giant Bullish Illusion

Ulli Market Commentary Contact

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

And it all looked so promising for the bulls this morning. The major indexes were broadly higher right after the opening bell when, about mid-day, things started to fall apart, and we were lucky to score any gains at all—thanks to the closing bell.

Driving the market early on were comments from Trump and other officials easing fears about the trade-war scare, which were offset by reports that the FBI had raided the offices of Michael Cohen, Trump’s personal lawyer. Some documents were seized that allegedly were related to payments to Stormy Daniels.

In the end, today’ round trip of 800 points for the Dow was nothing but a headline driven battle as the tug-of-war for headline domination continues. We’ll have to wait and see if that contest produces a winner or if the markets continue to be stuck in the current broad sideways trading pattern.

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ETFs On The Cutline – Updated Through 04/06/2018

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 125 (last week 173) 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 April 6, 2018

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2018/04/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-04-05-2018/

 ANOTHER TARIFF TANTRUM

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

A variety of factors combined to deliver another market knockout punch. Things looked dicey from the opening bell when the jobs report disappointed by delivering on 103k new jobs in March vs. an expected 170k. That was the good news.

The bad news continued in the China-U.S. trade fight as Trump proposed fresh tariffs. Relentless selling continued in the afternoon after Fed chairman Powell’s well intended speech discussing his support for a “patient” approach to raising interest rates fell on deaf ears and did nothing but accelerate downward momentum.

Then Trump confirmed that in regards to the effect on markets as a result of the trade standoff “I’m not saying there won’t be a little pain so we might lose a little of it but we’re going to have a much stronger country when we’re finished, and that’s what I’m all about.”

These were not exactly words designed to calm shattered nerves, and the VIX jumped to a 7 year high. Now barely 3 months into 2018, already we’ve seen no fewer than 22 sessions with intra-day moves in the Dow of 400+ points. Compare that to 2017 where we had 1 (hat tip to ZH for this stat)!

The S&P 500 did a repeat and for a brief moment broke through its 200-day M/A to the downside, for the 4th time this month, but it managed to close above it by a small margin. To me, it now looks to be just a matter of time until this level is broken, which may mean a return to bear market territory.

Our Trend Tracking Indexes (TTI) confirm that we are near an inflection point, which means that the current bullish cycles are coming to an end should downside momentum  continue.

How close are we? While our TTIs survived this day and remain on the bullish side of their respective trend lines (see section 3), we are within striking distance (around +0.5%) of breaking below them. Once that occurs, the odds are increased that a new bear market will be upon us. That is when the rubber meets the road, and we will step aside to the safety of the sidelines.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 04/05/2018

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, April 5, 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 +1.53% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Easing Trade Tensions Equal Higher Markets

Ulli Market Commentary Contact

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

What a difference a day makes! As much as yesterday’s trade-war fears were the culprit contributing to the early market dump, today’s easing of those fears helped spark an early rally that continued the rebound and led to the Dow’s first 3-day win streak in a month.

While the early rally ran out of steam mid-day, and a sideways pattern pushed the major indexes around and off their highs, we ended up with solid gains.

The supporting actors, in the form of Trump’s trade chief Peter Navarro and Economic Council director Larry Kudlow appeared to offer more soothing words about the trade tensions. “There is still time to hash out a deal” and “the latest measures are just proposals right now” were exactly the things traders wanted to hear in order to sustain the positive market momentum.

While the gains were broad, the exception were Semiconductors (SMH), which were dragged down by one stock, namely Micron, which has been a recent darling in the hedge fund industry, but its 4% loss pulled down the entire sector.

Interest rates bounded off their recent lows with the 10-year bond yield gaining 4 basis points to end at +2.83%. That helped the US Dollar (UUP) gain +0.38% adding to recent advances and now having conquered its 50-day M/A again.

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