US Dollar And Bond Yields Slammed

Ulli Market Commentary Contact

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

Just yesterday, I talked about how bond yields have been slipping and sliding despite the Fed’s efforts of hiking rates in December and March. The 10-year yield has dropped from 2.62% to 2.26% over the past 4 weeks. That trend accelerated today as that yield got slammed even more ending up at 2.18% for a loss of -3.54%.

Bond markets are usually ahead of stock markets in terms of anticipating future events, and what this move indicates is what I have been talking about for a long time, namely that the economy is heading south in a big way. This has been evident when looking at hard data, such as GDP forecast, EPS expectations, retail sales, subprime auto loans and commercial real estate just to name a few. The only questions remains: when will the equity market get the message?

Not helping matters was a sharp tumble in the dollar (-0.79%) as the index broke below its psychologically important 100 level to close at 99.40. That is only a slip away from dropping below its 200-day M/A, which has functioned as a support level as recently as late March. Banks got hammered again with the loser of the year award going to Goldman Sachs which, as of March 1st had sported a YTD gain of almost 6% and has now slipped into negative territory showing a YTD performance of -9.73%.

In case you like to see the visual, here it is:

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Bounce-Back Monday

Ulli Market Commentary Contact

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

To me, today’s trading session had the look of a relief rally after last week’s sell-off, and the fact that the war mongering with N. Korea did not turn into anything more but jawboning over the Holiday weekend.

The major indexes gained solidly with the S&P 500 trying to make up the losses of the last 5 trading sessions but fell short by a few points. Oddly enough, interest rates have been slipping and sliding since early March when the 10-year T-bond peaked at a yield of 2.62% compared to today’s close of 2.26%. What’s going on here? The Fed has raised rates twice, namely in December and March and threatened at least 2 more hikes in 2017, yet rates are declining.

The answer is simple in that the bond market has not priced in any more hikes due to the fact that economic data points are weakening by the day with thousands of retail stores closing accompanied by 10’s of thousands of job losses while GDP is quickly stumbling towards zero. So, the Fed’s hike appears to be more a measure of caution so that they have some ammo to lower rates again once the long overdue recession is finally recognized.

The following chart makes this abundantly clear:

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One Man’s Opinion: Just A Quick Reminder: The Federal Reserve Is Almost Insolvent

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By Sovereign Man

September 10, 2008 was one of the last “normal” days in the world of banking and finance.

That afternoon, the US Federal Reserve published its routine, weekly balance sheet report, indicating that the central bank had total assets worth around $925 billion.

Just a few days later, Lehman Brothers filed for bankruptcy, kicking off the most severe economic crisis since the Great Depression.

And almost immediately the Fed launched a series of unprecedented measures in a desperate attempt to contain the damage.

They called it “Quantitative Easing”, which was a fancy way of saying the Federal Reserve was printing money and giving it to the banks and US government.

When the commercial banks needed to sell their non-performing toxic assets, the Fed printed money to buy that garbage.
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ETFs On The Cutline – Updated Through 04/13/2017

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 246 (last week 241) 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 13, 2017

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ETF Tracker StatSheet

https://theetfbully.com/2017/04/weekly-statsheet-etf-tracker-newsletter-updated-04132017/

SLIPPING, SLIDING AND GRINDING

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

More saber rattling rattled the markets after a 21,000 pound MOAB (Mother of all Bombs) was dropped in Afghanistan to destroy some underground ISIS facilities. At this time, it’s unknown if the damage inflicted was greater in domestic equities than in the intended targets. For sure, early upward momentum vanished in no time and south we went with the major indexes ending in the red during this Holiday shortened week.

With the S&P and Dow now closing at 2-month lows, the question is as to whether the Trump-trade-train has been derailed after much of it was based on hype and hope rather than strengthening fundamentals. While there is no answer to that question yet, some technical damage has been done as all three major indexes have broken their respective 50-day M/As to the downside indicating medium term weakness.

Even good looking headlines for bank earnings failed to create enthusiasm, as a look under the hood revealed more questions than answers, so the bank slide continued with the YTD performance being deep in the red. Treasury yields dropped for the 5th straight week indicating a weakening economy, a viewpoint which I have pounded on for months.

The US dollar rebounded and recouped some of yesterday’s losses with UUP gaining +0.35%. To no surprise, gold and silver gained again with uncertainty gripping the markets, as stocks continue to hover in nosebleed territory as the following chart demonstrates:

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 04/13/2017

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ETF Data updated through Thursday, April 13, 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 +1.87% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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