Trade War Threats Hammer Markets; ‘Buy’ Signals Remain Intact

Ulli Market Commentary Contact

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

I was thinking this morning that something had changed in the markets over the past week or so. All of a sudden, stocks seem to react to day-to-day headline events and no longer consider ‘any’ news as good news for the bullish crowd, which is what we saw throughout 2017.

Supporting a similar view was ZeroHedge with their following comments after today’s market close:

All of a sudden, ‘stuff’ matters:

  1. Powell hawkish
  2. Trump lawyer resigns
  3. Trump trade wars start
  4. Funding market stress surges
  5. Credit markets spike
  6. Facebook new lows
  7. Tech tax and regulation

As a result, the markets dumped right after the opening bell and never looked back. Sparking the downturn was the continued threat of a trade war with China, which had been temporarily moved to the back burner, while Facebook’s data harvesting scandal took front and center earlier this week.

To be clear, Facebook’s troubles were persistent in pulling down the tech sector today with the Fed’s interest rate policy and the ongoing game of musical chairs in the White House all combining to the uncertainty in the market place. The fallout was broad with 10 of the 11 S&P sectors ending down for the day, as only utilities managed to buck the trend to gain +0.4%.

Markets pulled back worldwide with especially European stocks having an ugly day, while in China the tech sector was beaten badly. Financials (XLF) went down hard as a result of US and EU banks tumbling. The cost of funding (for corporations) soared, which may have a severe effect on scheduled stock buybacks, which are supposed to be “the” driver for equities this year. These elevated costs may have corporations reconsider the buy-back option.

Interest rates dropped and proved to be a safe haven. The 10-year bond yield gave back 6 basis points to close at 2.83% while the US Dollar (UUP) gained a modest +0.13%.

Our Trend Tracking Indexes (TTIs) dove but remain in bullish territory. For more details, please see section 3 below.

Read More

Indexes Slip On Hawkish Fed

Ulli Market Commentary Contact

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

Despite the major indexes gyrating wildly above their respective unchanged lines, ahead of the Fed, in the end, the elevated levels did not hold and we slipped slightly into the red. The big winners after the interest rate hike were Gold and Crude Oil.

There wasn’t really anything in the Fed announcement that was unexpected. Not only were rates hiked by 0.25% as predicted, but additional hikes for 2018 appear to be capped at only 2 more. The only fly in the ointment was the Fed’s upping of its forecast for the number of rate increases it expects in 2019 causing volatility to increase during the remainder of the session.

In ETF land things looked better with most of our broad holdings advancing as only LargeCaps (SCHX) ended up in the red by -0.14%. Leading to the upside were International SmallCaps (SCHC +0.55%), Emerging Markets (SCHE +0.51%) and International ETFs (SCHF +0.24%).

The yield on the 10-year bond went for a wild ride by first rallying towards the 2.93% level, and then dropping sharply to end the day unchanged at 2.89%. The US Dollar (UUP) never got off the ground and took a dive the entire session and lost -0.80%; and that was despite the Fed’s announcement as being of a hawkish nature, which should have been bullish for the dollar. Go figure…

Read More

Major Indexes Rebound As Tech Sell-Off Eases

Ulli Market Commentary Contact

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

Despite continued weakness in Facebook (FB -2.56%), the tech sector as a whole managed to recover from yesterday’s sell-off with QQQ rebounding a modest +0.55%. Supporting action came from the loser YTD, namely the energy sector (XLE), which gained +0.56%.

Facebook’s troubles with privacy violations continue to make headlines but, as I suggested yesterday, these may very well be only company specific issues and not a reflection of the entire technology sector. At least right now it appears that way. UK investigators coined a term describing corporate wrong doings like FB’s malfeasance as “improperly leveraging user data.” It’s hard to put a more positive linguistic spin on that…

The major indexes scored modest gains and so were our ETFs. Leading the pack were Emerging Markets (SCHE +0.96%), Aerospace & Defense (ITA +0.69%) and Semiconductors (SMH +0.68%). The US Dollar (UUP +0.60%) spiked for a change and pushed precious metals down. Interest rates rose with the 10-year bond yield climbing 4 basis points to 2.89%. Much anxiety was present in this arena with the Fed’s announcement on the direction of rates due out tomorrow.

Read More

Markets In Disarray

Ulli Market Commentary Contact

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

Right after the opening bell, there was no question as to which direction the markets would head as bulls were noticeably absent and weakness spread to most sectors. Anxiety was caused by a tech sell-off sparked by Facebook (FB), now also known as Faceplant, after the social media giant lost -6.77% and took the Nasdaq down.

Not only was FB’s drop its worst in some four years, it also did some chart damage by its price closing below its 200-day M/A for the first time since 1/5/17. The cause of all this were concerns about their management of user data, which can be loosely translated as “who all had access to their user data base?”

While these alleged misdeeds affected the entire market, it remains to be seen whether this will turn out to be just a company specific issue, and blow over quickly, or whether it will continue to cast a dark cloud over equities in general. Be that as it may, we should have that answer within a few days.

Not helping matters was continued nervousness and anxiety about the upcoming Fed meeting Tue/Wed under the new chair Jerome Powell. He is known to have a more hawkish view on rates and it is feared that he may favor four more hikes this year rather than the expected three.

Most likely, volatility will be with us until some of this uncertainty has been removed at which time we can put our focus back on the various trade war scenarios. Stay tuned.

Read More

ETFs On The Cutline – Updated Through 03/16/2018

Ulli Uncategorized 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 204 (last week 221) 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 March 16, 2018

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2018/03/weekly-statsheet-etf-tracker-newsletter-updated-03-15-2018/

 ENDING THE WEEK ON A POSITIVE NOTE

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

Not only did the S&P 500 break its losing streak on day 5, but the major indexes managed to eke out a green close for the session but ended down for the week.  As I mentioned daily, the potential trade wars, along with the game of musical chairs in the White House, were sufficient to hold the bulls in check. Today’s gains were small but broad with 9 of the 11 S&P sectors closing higher as Energy lead while Tech and Consumer Discretionaries lagged. The top economic headline had to be dismal housing sales data, of which not much was reported in MSM. More details here.

In ETF land, winners and losers for the day just about balanced each other out. Leading the pack were the Dividend ETF (DVY +0.65%) followed by MidCaps (SCHM +0.47%) and LargeCaps (SCHX +0.09%. On the downside, we saw International SmallCaps (SCHC -0.32%) along with Aerospace & Defense (ITA -0.23%) and Emerging Markets (SCHE -0.20%).

In the all important interest rate arena, the 10-year bond yield rose by 3 basis points to end the week at 2.85%, which is only 9 points away from its recent 4-year high of 2.94%. This level has recently been proven to be a point that, once reached, may spell trouble for equities again.

Since the beginning of March, we have been climbing in an ascending pattern (S&P 500), which has kept us on the plus side for the month despite this week’s sell-off. Should the tough trade-war talk headlines be softened or amicable solutions be found, I would expect the major indexes to resume their bullish pattern; at least on a short-term basis.Read More