Military Tensions Weaken—Markets Rally

Ulli Market Commentary Contact

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

The tug-of-war continued today as talk, that a strike on Syria may not be immediately in the cards, de-escalated tensions and giving a bullish assist to equities. The 3 major indexes scored solid gains after yesterday’s losses.

Six out of the eleven primary S&P sectors gained led by Financials (XLF +1.75%) with Semiconductors (SMH +1.66%) taking second place.

While geopolitical concerns took center stage, Trump’s rhetoric softened from Wednesday’s “get ready Russia,” to Thursday’s “never said when an attack on Syria would take place. Could be very soon or not so soon at all!” In other words, he said absolutely nothing.

Besides the war mongering atmosphere, the markets still have trade sanctions with China to deal with and the upcoming earnings season, which is expected to be strong. In the meantime, the S&P has been dancing around its 200-day M/A successfully so far but has been trending sideways in a broad range.

In other words, we have some positives, negatives and a bunch of uncertainty, either of which will be able to affect market direction on any given day, hence the roller coaster environment. Should the negative factors overwhelm the positive ones, we may very well see our Trend Tracking Indexes (TTI) head south again, but it remains to be seen whether that downside momentum strengthens to a point where all-out “Sell” signals are being generated.

Stay tuned!

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Geopolitical Tensions Push Markets Lower

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
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At least for one day, the U.S./China trade war battles were moved to the back burner, as geopolitical tensions dominated headline news, after tweets from President Trump that a military strike in Syria might be a possibility. That immediately ratcheted up verbal tensions with Russia, and the markets ended up being the fall guy by slipping into the close.

To me, most of this was just jawboning, after all, would you really want to announce an upcoming military strike? In any event, despite a mid-day attempt to conquer the unchanged line, downside momentum overwhelmed the bulls, and the major indexes closed modestly in the red.

Other data points had the CPI reports in line with expectations, while the minutes from the last Fed meeting included language suggesting that policy makers need to tap on the breaks of the economy. According to the Treasury, the government’s budget deficit was $209 billion in March, which was up 18% from the same month a year ago. Now that should have been headline news, but it was simply ignored. Go figure…

Interest rates slipped with the 10-year bond yield dropping 1 basis point to 2.79%. The US Dollar (UUP) continued its recent string of losses (-0.09%), while gold and crude oil bucked the trend by scoring solid gains.

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Soothing Trade-War Fears Propel Equities

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
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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]
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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]
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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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