ETF Tracker Newsletter For January 19, 2018

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ETF Tracker StatSheet

https://theetfbully.com/2018/01/weekly-statsheet-etf-tracker-newsletter-updated-01-18-2018/

POSSIBLE GOVERNMENT SHUTDOWN; MARKETS RALLY

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

It was a tug-of-war today that featured optimism over corporate earnings against the threat of a looming government shutdown. Despite the latter potentially adding more uncertainty, traders decided that any economic impact would negligible, so up we went late in the session with the S&P 500 and Nasdaq setting new records. As a side note, this is now the second week in a row that the S&P 500 and VIX were higher together, an event that hasn’t happen since 2013.

Today’s action benefited the ETF space with all of our holdings showing green numbers. Taking top billing were SmallCaps (SCHA) with a solid performance of +1.14%, followed by MidCaps (SCHM +0.95%) and Emerging Markets (SCHE +0.80%). Low man on the totem pole was Semiconductors (SMH) with +0.09%.

Interest rates kept creeping higher with the 10-year bond yield adding 2 basis points to end the week at 2.64%, its highest level since mid-2014. Gold held steady, but the whipping boy of the past year, namely the US Dollar (UUP), did a pump and dump by retreating early in the session and then recovering and managing to climb above the unchanged line by a meager +0.17%.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 01/18/2018

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, January 18, 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 +4.97% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Hitting The Pause Button

Ulli Market Commentary Contact

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

The major indexes started the day in negative territory, recovered and moved briefly above the unchanged line but then sold off into the close resulting in minor losses.  While the Dow managed to hang on to its 26k level, the S&P slipped below its 2,800 milestone and tied the longest stretch in history without a 5% pullback at 394 sessions, according to MarketWatch.

Keeping the markets in check were worries about the potential of a partial government shutdown this weekend as well as earnings reports that were ok but not great.

This uncertainty flowed over to ETF space as well, where the picture was mixed. Closing up were Semiconductors (SMH +0.74%), Emerging Markets (SCHE +0.27%) and Transportations (IYT +0.06%). Heading south were Aerospace & Defense (ITA -0.80%), SmallCaps (SCHA -0.64%) and International SmallCaps (SCHC -0.42%).

Interest rates rose with the 10-year bond yield rising 5 basis points to close at 2.62% after having reached an intra-day high of 2.64%, the highest level since December 2016. The US Dollar (UUP) continued its recent pattern, namely being pushed higher early in the session only to be dumped into the close (-0.13%).

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Picking Up Speed And Knocking Out More Milestones

Ulli Market Commentary Contact

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

Yesterday’s pull-back proved to be ephemeral when considering the runaway train the major indexes resembled today. Looking at the chart above, it was about as straight of an ascending line as you can paint, as the bulls took charge again and pushed the major indexes into new all-time high territory.

The Dow led the rebound effort and ended solidly above the 26k level for the first time. Giving an assist was the release of the Fed’s beige book, which indicated an optimistic outlook for 2018 for most of the country.

Even the ever increasing possibility of a government shutdown this weekend could not damp the bullish mood. Either a possible shutdown is seen as a positive, or it’s the best kept secret that ruling politicians will actually let it happen. Take your pick…

The enthusiasm did spread to the ETF space as well with green being the only color of the day. Heading today’s ramp-a-thon were Semiconductors (SMH) with a chest pounding +2.99%. Following in its shadow with impressive results were Emerging Markets (SCHE +1.53%), the Dividend ETF (SCHD +1.50%) and LargeCaps (SCHX +0.94%). Transportations (IYT) lagged but ended to the plus side with +0.32%.

Interest rates rose with the yield on the 10-year bond gaining 3 basis points to end the day at 2.57%, its highest level since December 2016. The US Dollar (UUP) showed some strange behavior today by pumping, dumping and pumping again and then leaving the just reached December 2014 level behind to close up for the first time in 5 trading days.

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Reversal Tuesday

Ulli Market Commentary Contact

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

Right after the opening bell, the major indexes stormed ahead to set new records, only to be reminded that nothing goes up forever without a break or some sort of a pullback. The Dow raced past the 26k milestone only seven days after having conquered its 25k level, which was triple the pace of the 24k to 25k advance. Then some reality set in, and we went backwards in an almost straight line and closed in the red.

There was no particular event for this sudden reversal other than the realization that we may have come too far too fast over the past 12 months. Still, earnings season is ahead of us and will most likely support the underlying bullish mood.

The sea of red spilled over to the ETF space we are following with only Semiconductors (SMH +0.46%) and International SmallCaps (SCHC +0.08%) showing gains. On the downside, Transportations (IYT -1.37%) were leading, followed by US SmallCaps (SCHA -1.20%) and Aerospace & Defense (ITA -1.07%).

Interest rates slipped a tad with the yield on the 10-year bond giving back 1 basis point to close at 2.54%, which was enough of a pullback to allow the 20-year bond (TLT) to gain +0.42%. Gold was shining by bucking the negative equity trend and gaining +0.29% to end the day at $1,338. Not so lucky was the US Dollar (UUP) which, despite an early session rally, ended up gapping down sharply, losing -0.55%, and closing at a level last seen in December 2015. Ouch.

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ETFs On The Cutline – Updated Through 01/12/2018

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 249 (last week 255) 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.