ETF Tracker Newsletter For May 4, 2018

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ETF Tracker StatSheet

https://theetfbully.com/2018/05/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-05-03-2018/

 FRIDAY SAVES THE WEEK

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

After slipping and sliding all week, the bulls finally regained some strength and pulled the major indexes out of the doldrums with the S&P 500 almost getting back to last Friday’s close.

The big mover was Apple, which was responsible for some 50 points of the Dow’s 332 point gain, for no reason other than reports that Warren Buffett bought 75 million shares. Apple not only surged to record highs but also helped the Dow to score its best day in 3 weeks after having fallen in 9 of the past 13 sessions.

This helped traders to shove reports of tense China trade talk negotiations on the back burner, but I am sure it will be moved to headline news again next week once concrete results emerge.

Of course, a rebound rally would not be complete without input from the Fed. Two of their mouthpieces appeared to cheer on the markets.

First, it was John Williams who declared that they are “comfortable overshooting 2% inflation for a while,” which was followed by Bill Dudley’s “I don’t think the Fed cares about financial markets per se.” That was enough to overshadow any weakness caused by the weaker-than-expected April non-farm payroll report, which some analysts graded with a “C-.”

On the week, the major indexes and bonds were saved by closing just about unchanged, helped in part today by the fact that shorts were squeezed and had to cover resulting in the Dow and S&P 500 now having successfully bounced off their 200-day M/As—again, thereby extending the bullish theme a little while longer.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 05/03/2018

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ETF Data updated through Thursday, May 3, 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 +0.75% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Trade Worries Dump And Then Pump The Major Indexes

Ulli Market Commentary Contact

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

Another wild day in the markets pulled the major indexes way below the unchanged line with the Dow sinking some 400 points and the S&P 500 dropping below its 200-day M/A.

The cause of all this were the 2-day trade negotiations with China that had traders on edge when suddenly White House economist Calabria commented after day 1 that “he was ‘optimistic’ and that the US has ‘discreetly’ given China a list of asks and that the day ended “pretty positive.” That’s all Wall Street wanted to hear and off to the races we went.

What they did not want to hear and simply ignored, and may backfire later on, was Cambria’s conclusion that “the tough part in the talks is ensuring that China keeps its promises.” No joint statement was given at the end of the first day.

Be that as it may, only the Dow climbed back into the green, while the S&P and Nasdaq fell short. Nevertheless, despite the recovery, technical damage was done as the 200-day M/As were violated to the downside intra-day, the Dow and S&P managed to close back above it.

We’ll have to wait and see if this constant testing of the 200-day M/As will eventually cause a permanent break to the downside, which is sure to come with bearish consequences.

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Confusion Reigns—Markets Drop

Ulli Market Commentary Contact

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

You would have expected the markets to show some signs of life with Apple posting better than expected earnings and revenue after the close yesterday. Or, that the Fed’s statement was interpreted as somewhat dovish despite saying that further rate hikes are “needed in the coming months.”

If you thought that, you were wrong. Maybe it was because Apple’s glowing report card was simply a result of some $22.88 billion in buybacks of its own shares in Q1 along with doling out another $3.2 billion in dividends. To put this in perspective, according to ZH, the amount of stock bought back by Apple is larger than the market cap of 275 of the 500 companies in the S&P 500 index.

Or, maybe confusion reigned supreme when the Fed statement mentioned the words “symmetric inflation objective,” and traders and algos alike had to scramble to figure out what that meant.

Be that as it may, in times of uncertainty, the markets tend to take the way of least resistance, which is down. That’s what happened, and the major indexes headed south and closed near their lows of the day.

Interest rates were mixed with the 10-year bond yield remaining unchanged at 2.97%. Having a wild day was the US Dollar (UUP), which dumped sharply and then recovered to rally +0.45%.

This turned out to be another session that pushed our Trend Tracking Indexes (TTIs) closer to a potential “Sell” signal. Please see section 3 below for the exact details.

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Reversal Tuesday

Ulli Market Commentary Contact

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

In a reversal of what we have seen lately, the markets dug themselves a hole early on but managed to climb out of it during the afternoon with the Nasdaq and S&P 500 actually closing in the green. It was a quiet session with most of the world being on the sidelines due to the May Day Holiday.

It was a mixed picture with the clear winner being the Nasdaq, even though Apples’ earnings are still on deck and won’t be out till after the close. The Dow ended in the red thanks to a weak McDonald’s report card while possible trade talk repercussions pulled Boeing down by -1.22%.

Interest rates rose today with the 10-year bond yield climbing a modest 2 basis points to end at 2.97%. Showing continued and surprising strength was the US Dollar (UUP +0.66%), which has now sliced through its 200-day M/A to the upside and thereby shows bullish ambitions. Opinions still vary as to whether this move up is sustainable or not considering the drop UUP has seen over the past 15 months.

The Fed will be in the limelight during its 2-day meeting until the results regarding interest rates will be made public tomorrow at 11 am EST. They are expected to hold the course on rates and signal no change for the time being, but, you can never be sure.

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Ending The Month On A Sour Note

Ulli Market Commentary Contact

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

As has been the meme for the past few weeks, an early rally gave way mid-day to a broad sell-off despite positive earnings reports, which simply could not stem the downward momentum. Several last minute attempts to reverse the tide failed, and the major indexes dove into close scoring the lows for the session.

25 of the 30 Dow components ended up in the red, joined by all 11 S&P sectors, the downside leader of which was Healthcare with -1.6%. Even energy, which previously had shown some strength due to the uncertainty in the Middle East, had no bullish support and ended flat.

For April, the returns for the major indexes were anything but noteworthy, but at least we eked out some green numbers. The Dow added 0.3%, as did the S&P 500, while the Nasdaq scored a gain of less than 0.1%

So far, more than 50% of the S&P’s companies have shown their report cards with 79% of them beating Wall Street’s expectations. That is a solid percentage, which makes it somewhat concerning that the markets are showing nothing but a lackluster attitude and reaction to good earnings.

Of course, let’s not forget the host of distractions that have placed a blanket of worry over Wall Street. I am talking about protectionism and geopolitics along with concerns that global economic growth might be slowing down further. Higher bond yields are not supporting the bullish equity theme, although over the past few trading session, we’ve seen the 10-year yield back off from its 3% level, which is widely recognized as a hindrance to further upswings in the equity market.

While our Trend Tracking Indexes (TTIs) are still in “Buy” mode, we now have reached a level where we reside in striking distance of a new “Sell” signal. I have no idea whether that event will materialize in May, but I am prepared to act should a signal be given.

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