Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.
The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (244 vs. 254 current).
Friday was a snooze-fest for the S&P 500, which barely budged amid a slew of lackluster earnings reports. Intel was the biggest loser, plunging 11% after issuing a dismal outlook for the first quarter.
Other stocks like KLA Corp and Visa also disappointed investors with weak guidance and slowing growth.
But hey, it’s not all doom and gloom. The market still managed to end the week on a positive note, thanks to some upbeat economic data. The core PCE index, the Fed’s favorite inflation measure, came in as expected for December, while the GDP and PCE numbers for the week were also reassuring. Traders are hoping for a ‘Goldilocks’ scenario, where the economy cools down a bit but stays in the green.
However, not everything is as rosy as it seems. The S&P 500 may be hovering near record highs, but that’s mostly driven by a few mega-cap tech stocks. The Value Line Geometric Index, which tracks the median performance of about 1,700 North American companies, is still 17% below its peak from November 2021. That shows how uneven the market recovery has been.
Meanwhile, the rest of the market was pretty mixed this week. Small caps outshone their larger peers, while the Dow and Nasdaq lagged. The S&P 500 tried and failed three times to break above 4,900 but was rejected each time.
Bond yields rose today but were flat for the week. Gold was also stagnant, while the dollar edged up slightly.
And here’s a fun fact that you won’t hear on the news: the Fed just posted a whopping $114 billion loss for the year, the largest in its history:
That puts it third on the list of the biggest bankruptcies in America, behind only Lehman Brothers and Washington Mutual.
ETF Data updated through Thursday, January 25, 2024
How to use this StatSheet:
Out of the 1,800+ ETFs out there, I only pick the ones that trade over $5 million per day (HV ETFs), so you don’t get stuck with a lemon that nobody wants to buy or sell.
Trend Tracking Indexes (TTIs)
These are the main indicators that tell you when to buy or sell Domestic and International ETFs (section 1 and 2). They do that by comparing their position to their long-term M/A (Moving Average). If they cross above, and stay there, it’s a green light to buy. If they fall below, and keep going, it’s a red light to sell. And to make sure you don’t lose your shirt if things go south, I also use a 12% trailing stop loss on all positions in these categories.
All other investment areas don’t have a TTI and should be traded based on the position of each ETF relative to its own trend line (%M/A). That’s why I call them “Selective Buy.” In other words, if an ETF goes above its own trend line, you can buy it. But don’t forget to use a trailing sell stop of 12%, or less if you’re feeling nervous.
If some of these words sound like Greek to you, please check out the Glossary of Terms and new subscriber information in section 9.
DOMESTIC EQUITY ETFs: BUY— since 11/21/2023
Click on chart to enlarge
This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has broken above its long-term trend line (red) by +7.56% and is in “Buy” mode as posted.
The market rose today, as traders digested signs of strong economic growth and the latest earnings reports.
The U.S. economy grew by 3.3% in the fourth quarter, beating the 2% forecast and showing resilience despite Fed rate hikes. Of course, this number may change later when no one is paying attention. How can the forecast be so wrong?
The report also had good news on inflation. The personal consumption expenditures price index went up by 2.7% on an annual basis, down from 5.9% last year.
The mood soured a bit when Tesla tanked 10%. The electric car maker reported weak fourth-quarter results and warned of lower sales growth for 2024. On the bright side, IBM soared 8% after the tech giant beat earnings and revenue expectations.
Bond yields fell, the MAG7 stocks slid along with Tesla, the dollar rose, and oddly enough, so did gold. Oil prices broke free from their range and neared November highs.
ZeroHedge pointed out that the last two weeks of February have been the worst two weeks of the year since 1928. Is this a coincidence or a curse?
Netflix added more subscribers than ever in the fourth quarter, sending its shares up 13%. The streaming giant now has 260.8 million couch potatoes hooked on its shows. It also beat revenue and earnings forecasts, making Wall Street happy.
But not everyone was happy. Some traders were worried about the slowing economy and the risk of a downturn. They were surprised by how well the market held up, especially the S&P 500, which barely finished in the green.
Microsoft also had a good day, rising 1% and joining the $3-trillion club. It’s now one of the two most valuable companies in the world, along with Apple. Maybe they should buy each other and call it MicroApple.
The economic data this week will be important, as traders will watch the GDP and the inflation numbers. They will also keep an eye on the earnings reports from Tesla, Las Vegas Sands, and IBM, among others.
So far, most companies have beaten the low expectations, but that’s not saying much. ZeroHedge reminded us that longer supplier lead-times are bad, not good. They mean more disruptions and delays, not more demand. Remember the COVID lockdown mess? Yeah, that was bad. And it’s not over yet.
But the market ignored that and focused on the ‘strength’. That pushed the rate-cut hopes lower and the bond yields higher. The 5-year yield jumped 11bps from its low, making bond investors nervous.
Gold also lost some shine but stayed above $2k. The dollar continued to slide but not giving a boost to the precious metal.
The Mag7 stocks (Amazon, Apple, Facebook, Google, Microsoft, Netflix, and Tesla) rallied, but couldn’t keep all their gains. Crude oil broke out of its range and hit a one month high, thanks to the weaker dollar and the hopes of more stimulus.
China tried to prop up its stock market with money and rules, but it didn’t work. This chart shows how little impact it had. Maybe they should try something else, like letting the market decide.
With bond yields rising, the question is: how long can stocks keep ignoring reality? Or are they seeing something we don’t?
The Dow Jones Industrial Average had a bad day, retreating from its all-time highs as traders sifted through the latest earnings reports, while the S&P 500 and Nasdaq squeezed out a positive finish after shaking off some midday jitters.
The 30-stock index was dragged down by a 12% plunge in 3M, which issued a gloomy outlook. On the bright side, airlines soared together, while Verizon and Proctor and Gamble cushioned the blow for the Dow by rising more than 5% and 4% respectively.
But traders are on edge and wondering how long the party can last, especially since the rally this year has been driven by tech stocks such as Nvidia, while the rest of the market has lagged. This month alone, Nvidia is up 20%. In contrast, the small cap Russell 2000 is down by more than 1%.
On the economic front, we learned that the Richmond Fed Manufacturing survey tanked to its lowest since Covid. The index nosedived to -15, much worse than the expected -8, which indicates a contraction.
The Mag7 stocks crept higher but remained within their 2-day trading range. Bond yields bounced back and wiped-out yesterday’s losses.
The dollar surged to last week’s 2024 highs, and for some mysterious reason gold followed suit instead of moving in the opposite direction from the US currency. Crude oil swung wildly and ended the session flat.
After the crash of the Chinese stock market, authorities tried to prop it up by announcing a multi-billion-dollar buying spree which, as ZeroHedge put it, “barely managed to get the broadest measure of Chinese stocks higher.”
It seems that when it’s over, it’s really over. Should the rest of the world take notes?
