Reversal Tuesday

Ulli Market Commentary Contact

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

Right after the opening bell, the major indexes stormed ahead to set new records, only to be reminded that nothing goes up forever without a break or some sort of a pullback. The Dow raced past the 26k milestone only seven days after having conquered its 25k level, which was triple the pace of the 24k to 25k advance. Then some reality set in, and we went backwards in an almost straight line and closed in the red.

There was no particular event for this sudden reversal other than the realization that we may have come too far too fast over the past 12 months. Still, earnings season is ahead of us and will most likely support the underlying bullish mood.

The sea of red spilled over to the ETF space we are following with only Semiconductors (SMH +0.46%) and International SmallCaps (SCHC +0.08%) showing gains. On the downside, Transportations (IYT -1.37%) were leading, followed by US SmallCaps (SCHA -1.20%) and Aerospace & Defense (ITA -1.07%).

Interest rates slipped a tad with the yield on the 10-year bond giving back 1 basis point to close at 2.54%, which was enough of a pullback to allow the 20-year bond (TLT) to gain +0.42%. Gold was shining by bucking the negative equity trend and gaining +0.29% to end the day at $1,338. Not so lucky was the US Dollar (UUP) which, despite an early session rally, ended up gapping down sharply, losing -0.55%, and closing at a level last seen in December 2015. Ouch.

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ETFs On The Cutline – Updated Through 01/12/2018

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 249 (last week 255) 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 January 12, 2018

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2018/01/weekly-statsheet-etf-tracker-newsletter-updated-01-11-2018/

MORE RECORDS IN THE BOOKS

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

Earnings season unofficially started with a bang, as the major indexes continued their march into uncharted territory with optimism about the upcoming corporate report cards taking center stage. All 3 major indexes spiked again with consumer discretionary and energy shares leading the gains. Looking at the big picture, the S&P 500 had its best start to a year since 1987, while the Dow and Nasdaq had their best start since 1997 and 2004 respectively.

Things looked good in the ETF space I follow with green being the favorite color of the week. Leadership rotated from yesterday with Aerospace & Defense (ITA) gaining +1.54% followed by International SmallCaps (SCHC +1.22%) and International ETFs (SCHF +0.91%). The laggard of the day turned out to be MidCaps (SCHM) with +0.33%.

Interest rates presented a mixed picture with 10-year bond yield rising by 1 basis point, while the 30-year bond yield declined 6 basis points. Gold surged today and has now rallied for 5 straight weeks. Crude Oil bounced higher and the US Dollar (UUP) got spanked hard, gapped down and lost -1.04% to reach a level last seen in September when it made its 2017 low.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 01/11/2018

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, January 11, 2018

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 +4.78% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Anticipation Of Good Earning Catapults The Major Indexes

Ulli Market Commentary Contact

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

Yesterday’s worries about China’s lack of interest in purchasing US Treasuries are now a thing of the past while other concerns, such as jobless claims and wholesale inflation data, were simply ignored in anticipation of a hopefully great earnings season, which is expected to be the catalyst to drive the markets to new highs.

So, up we went right after the opening bell, never looked back, and the major indexes, actually accelerated into the close setting new all-time highs across the board. Yes, even the YTD lagging SmallCaps participated. Surprisingly, all this happened with the VIX rising and testing the 10 level.

Showing strong leadership in our ETF space were Transportations (IYT) with an impressive +2.37% gain, which made it not only its 8th up day in a row but also its best start to a year since 2001. Taking second and third place were SmallCaps (SCHA +1.62%) and MidCaps (SCHM +1.14%). Lagging the bunch were Semiconductors (SMH) with +0.47%.

Treasury yields reversed from their recent rally with the 10-year yield giving back 1 basis point to 2.54%, while the 30-year auction attracted a lot of interest contributing to the lower yield scenario. The US Dollar (UUP) was not so lucky and plunged -0.42% and is now in danger of taking out the lows made earlier this year.

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Logging The First Down Day Of The Year

Ulli Market Commentary Contact

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

I had to happen eventually and today was the day. The major indexes actually traded below the unchanged line all day, staged a comeback but ended slightly in the red, as some profit taking set in. Caution prevailed as yesterday’s bond slam-fest remained on traders’ minds. The cause of jumping bond yields were reports out of China that they are considering “slowing or halting” purchases of U.S. debt, an event that would definitely accelerate a rise in yields.

With the markets going nowhere, that theme carried over to the ETF space as well, where losers outnumbered gainers. Actually, the only ETFs in our stable of holdings ending in the green were Financials (XLF +0.84%) and Transportations (IYT +0.10%). All others retreated led by the winner YTD, namely Semiconductors (SMH -1.32%), followed by Emerging Markets (SCHE -0.48%) and MidCaps (SCHM -0.35%).

Intra-day, the yield of the 10-year bond climbed another 4 basis points before backing up and ending unchanged at 2.55%. The more interest rate sensitive high-yield arena (HYG) suffered for the second day in a row and closed lower by -0.22%. The US Dollar (UUP) slumped after 3 days straight of gains and lost -0.25%.

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