ETF Tracker Newsletter For May 19, 2017

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ETF Tracker StatSheet

https://theetfbully.com/2017/05/weekly-statsheet-etf-tracker-newsletter-updated-05182017/

BULLARD PUMP DRIVES MARKETS

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

When all else fails, and the markets are in danger of heading south in a big way, it’s nice to know that we can always count on one of the Fed mouthpieces to create an enticing news headline, designed to be picked up by computer algos  to push the markets in the desired direction.

Such was the case today, when James Bullard took to the airwaves in a prepared speech saying that “all the talk of an “overheating” economy was just that saying that “financial market readings since the March decision have moved in the opposite direction” of what would normally occur after a rate hike, adding: “this may suggest that the FOMC’s contemplated policy rate path is overly aggressive relative to actual incoming data on U.S. macroeconomic performance.”

Translation: We are not sure if further rate hikes are really warranted as he added that inflation and inflation expectations “have surprised to the downside” and noted that “financial market readings since the March decision have been opposite of expectations.”

That’s exactly what computer algos wanted to ‘hear’ and off to the races we went with the three major averages closing in the green for the day but in red for the week. US Macro data disappointed for the 9th straight week and have now dropped below the election lows as the chart shows:

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 05/18/2017

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ETF Data updated through Thursday, May 18, 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 +2.97% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Bouncing Off The Lows

Ulli Market Commentary Contact

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

Despite the major indexes closing at their lows of yesterday’s session, downside follow through was contained, and a rebound rally materialized but faded into the close. Nevertheless, equities managed to squeeze out some modest gains despite a bloodbath in the Brazilian stock market with EWZ getting spanked at the tune of -16.33%. Ouch!

Not only did domestic stocks bounce back but the US dollar also showed signs of life with UUP gaining a modest +0.36% after getting absolutely hammered 4 days in a row, however, the dollar index is still down 1% for the week. Both assets benefited from former FBI chief Comey’s admission under oath that “obstructions of his investigations never happened.” Imagine my surprise…

Uncertainty remained in the banking sector but the Regional banking ETF (KRE) managed to gain +0.77% for the day. However, YTD, the entire sector looks weak with especially Goldman Sachs (GS) showing a loss of -9.91%.

Take a look at this chart, which compares YTD performance of Wall Street’s “darling banking stocks” vs. the banking index:

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Dollar Slumps, Gold Pumps And Equities Dump

Ulli Market Commentary Contact

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

I finished yesterday’s piece by stating that the current VIX level is simply unsustainable. As if by magic, the VIX suddenly exploded to the upside today spiking from 11 to 17, which is the most in 8 months and interrupting the longest period of calm for the S&P 500 since 1969.

Consequently, the major indexes took a long overdue dive with the Nasdaq suffering the biggest daily drop in almost 12 months as turmoil in Washington put a big question mark on the feasibility of Trump’s pro-growth agenda, which had been the basis for the post-election equity drive into record territory.

Political uncertainty was the culprit, and it played out as follows:

  1. S&P 500 biggest drop since Sept 2016 (broke below 50-dma)
  2. Small Caps biggest drop since Brexit June 2016 (broke below 50-, 100-dma)
  3. Nasdaq biggest drop since Brexit June 2016
  4. Dow Industrials biggest drop since Sept 2016 (broke below 50-dma)
  5. Dow Transports biggest drop since June 2016 (broke below 50-, 100-dma, and near 200-dma) – now negative year-to-date

And across asset-classes:

  1. VIX biggest jump since Brexit June 2016 (smashed through 50-, 100- and 200-dma) above 15
  2. 30Y US Treasury Fut biggest gain since June 2016
  3. USD Index down 6th day in a row to lowest since trump election
  4. USDJPY’s biggest drop since July 2016 (broke below 50- and 100-dma) to 110 handle

Source: ZeroHedge

Financials took a big hit and are back in the red YTD as banks got hammered. Even Apple couldn’t survive the selling onslaught and dropped 3.4%, its worst day since April last year.

The flight to safety was on as Treasury yields crashed and bonds rallied with the widely held TLT gaining +1.46%. The dollar index was clubbed again for the 6th day in a row and has now reached pre-election levels. Gold was the beneficiary and broke above key technical resistance points.

Will this downdraft continue? It’s too early to tell, but all major indexes closed at their lows for the day, which does not bode well for a positive opening tomorrow.

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Dollar Slumps And Gold Jumps

Ulli Market Commentary Contact

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

It was a mixed news bag as the housing recovery showed signs of “un-recovering” with Housing Starts dropping 2.6% in April after getting hammered in March with a 6.6% reduction. Not to be outdone, Building Permits joined in by tumbling 2.5% MoM, way below expectations.

On the retail side, the apocalypse continued as clothing retailer Rue21 filed for bankruptcy last night. Restructuring and streamlining is on the agenda translating to about 400 store closings (out of 1,179). Rating agency Fitch expects a flood of future defaults and has now eleven retailers on its concern list. Well, as I reported before, we are well on our way to the forecast 8,000 plus store closings for 2017.

The US dollar has been slipping and sliding for 5 days in a row and has now erased all post-election gains. The question remains as to whether we will see another rebound after testing these lows for the 3rd time in the past 2 months, ever since Trump commented on the “too-strong dollar.” The beneficiary of this weakness has been gold, which has been rallying for 5 days in a row.

I keep talking about the low levels of the VIX (Volatility Index), which has market participants in a sleepy state of complacency as it supports the narrative that markets can only go one way—and that is up. The VIX set a new record by having closed 17 consecutive days in a row below 11, which has never happened before! That is unbelievable and certainly not sustainable.

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Weak Global Economic Data = Markets Racing To New Highs

Ulli Market Commentary Contact

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

The S&P 500 finally managed to break through its 2,400 glass ceiling to new all-time highs while the Nasdaq joined the fun by closing in record territory as well. Supporting actors were Johnson & Johnson, along with Cisco, both of which rallied more than 2%.

Today’s gain came in the face of the biggest global cyber attack in history, which struck over 100 nations but left the US mainly unaffected. The attack was focused on the old Windows operating systems, like XP and Vista, which Microsoft has not been supporting in many years and which are lacking up to date security measures. To me, it’s hard to believe that some governments and corporations are still operating using outdated platforms from an era that did not have to deal with the type of sophisticated hacking/spying software available these days.

In regards to world economies, not only did Chinese data disappoint, Europe showed negative numbers as well and US data was dismal, all of which sent the global macro surprise index (shown below) to its lowest since November. Ah yes, in this new normal environment, these are perfect reasons for the markets to rally.

Take a look:

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