Closing Out May On A Weak Note

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

For the second day in a row, the major indexes limped slightly lower but ended up closing the out the month on the plus side. The Nasdaq took the lead with +2.5%, followed by the S&P 500 with +1.2%, while the Dow desperately hung on to the unchanged line but conquering it by a scant +0.3%.

The economic hits kept coming even though I don’t particularly look for them. Financials headed south, because two of the largest banks (JPM, BofA) signaling a trading slow down, warning  that revenue will be down as much as 15%, pushing them into the red YTD. Macro data collapsed for the second month in a row, the biggest sequential drop in US economic conditions since May 2011, according to ZH.

Pending home sales in April hit the skids and tumbled 5.4% YoY, which is their biggest drop since the middle of 2014. Crude Oil tanked again and appears to be firmly stuck below the $50 level. Interest rates slipped with the 10-year T-Bond (TLT) gaining +0.25%. The US Dollar (UUP) headed lower losing -0.24% today but gave back -2.1% for May; it’s down YTD by -5.3%.

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Going Nowhere Fast

Ulli Market Commentary Contact

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

The markets seemed to have a hangover after the 3-day weekend with the major averages remaining stuck below the unchanged line giving back  some of last week’s gains.

Macro data continues to head south as consumer confidence dropped to its weakest since February confirming that hope has faded as evidenced by plans to buy homes, cars and major appliances, which hit their lowest level of the year.

No helping the mood on Wall Street are, and have been, appearances by banks and heavyweight money managers warning that Fed re-normalization could send equities 30% lower with BofA being the latest. Then famous hedge fund guru Paul Singer opined this morning that “All Hell Will Break loose” by issuing this:

Given group think and the determination of policy makers to do ‘whatever it takes’ to prevent the next market ‘crash,’ we think that the low-volatility levitation magic act of stocks and bonds will exist until the disenchanting moment when it does not. And then all hell will break loose (don’t ask us what hell looks like…), a lamentable scenario that will nevertheless present opportunities that are likely to be both extraordinary and ephemeral. The only way to take advantage of those opportunities is to have ready access to capital.

Surely, none of this helped the markets, and it appears that after the recent gains, which wiped out May’s mid-month losses, we will silently fade into the last day of May tomorrow.

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One Man’s Opinion: Legendary Investor Asher Edelman Says “I Have No Doubt” PPT Behind Market Rally

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By ZeroHedge

Legendary vulture investor Asher Edelman, the 1980s model for Gordon Gekko, strayed into what must’ve been uncomfortable territory for CNBC during an appearance on “Smart Money” when he discussed his view that the government’s “plunge protection team” is the only thing propping up the current market rally, and said he suspects that it has again been recently een intervening in the market to keep stocks at record highs.

Edelman simply notes that he doesn’t want to be in the markets right now because “I don’t know when the plug is going to be pulled.”

Few can explain the market’s recent resilience, holding near record highs despite weak economic data and intensifying geopolitical tensions. The main benchmarks have risen for the fourth straight day following last week’s “Trump Dump” despite a terror attack in the U.K., the worst soft economic data since February 2016, and surprisingly low trading volume.

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ETFs On The Cutline – Updated Through 05/26/2017

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 273 (last week 264) 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 May 26, 2017

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ETF Tracker StatSheet

https://theetfbully.com/2017/05/weekly-statsheet-etf-tracker-newsletter-updated-05252017/

PUSHING HIGHER

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

Despite treading water all day, the S&P 500 and Nasdaq managed to crawl slightly above the unchanged line, thanks to a last minute levitation, thereby closing at another all-time high. Today’s assist came from a rise in consumer discretionary stocks like Best Buy (BBY), which pulled back a little today after adding +21.5% on Thursday.  Even oil showed some signs of life after yesterday’s drubbing by gaining +1.80%.

Today’s gains, although tiny, had nothing to do with improving fundamentals, which still leave a lot to be desired of, to say it mildly. Case in point is the US Macro data index, which now has fallen to 15-month lows, as well as the Nasdaq Composite, the Earnings Expectations of which have slumped to 2017 lows; but, none of these data points matter, until one day when they do.

CitiBank came out forecasting that a close today above 2,405 on the S&P 500 suggests we can rally towards 2,500+ in the coming weeks. While that is a positive prediction, I prefer not to guess but to use my Domestic Trend Tracking Index (TTI) for directional guidance. The TTI is currently deeply entrenched on the bullish side (see section 3), and we will follow its trend until it either ends or our trailing sell stop points give the signal to exit.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 05/25/2017

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ETF Data updated through Thursday, May 25, 2017

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 +3.78% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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