Dow Continues Record Setting Pace; Bonds Get Clobbered

Ulli Market Commentary Contact

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

Thanks to Boeing, which added more than 60 points to the Dow, the index set another record while the S&P 500 and Nasdaq gained for the 6th straight day. There was no particular driver for the advance other than continued market optimism.

In our ETF space, winners outpaced losers by a small margin. Financials (XLF) added +0.78%, thanks to the surge in interest rates, with Aerospace & Defense (ITA +0.64%) taking second place. On the downside, Semiconductors (SMH) struggled and gave back -0.94% followed by SmallCaps (SCHA) with -0.10%.

Things were not so calm in bond land, as the 10-year yield jumped 6 basis points to close at +2.55%, which is the highest yield since December of 2016, shortly after Trump’s election. That did not bode well for the 20-year bond ETF (TLT), which gapped down and dove -1.34% to reach a level last seen in the middle of last December. Interest rates will be key to the continuation of the bull market in equities, with a danger point lurking once the 3% level (10-year bond yield) gets broken to the upside.

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A Big Day For The Bulls

Ulli Market Commentary Contact

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

This is the time of the year when market historians come out and use the first five trading days of the year to compare it to the past and then project the results out for the remainder of 2018. Today was no different, and these are the results as translated by ZH:

Thanks to today’s gains, the S&P 500 is up 2.5% – doubling the gains in gold – as bonds are suffering so far…which means, as Ryan Detrick notes, “since 1950, when the first 5 days are up over 2%, the S&P 500 is higher for the year 15 out of 15 times with an average return of +18.6%. “

Unless, of course, this time is different!

Be that as it may, two of the three major indexes eked out another gain while the Dow struggled and fell short reaching the unchanged line. In ETF space, we saw predominantly gains with only International SmallCaps (SCHC -0.13%), Financials (XLF -0.14%) and International Equities (SCHF -0.06%) surrendering a fraction of a percent. On the positive side, Transportations (IYT) led with +0.81%, followed by Semiconductors (SMH +0.69%) and Aerospace & Defense (ITA +0.60%).

The yield on the 10-year bond rose 2 basis points to 2.49%, its highest level since March 2017 and is now honing in on last year’s high. The US Dollar Index (UUP) showed signs of life by gaining +0.46%, its best bounce in 3 weeks.

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ETFs On The Cutline – Updated Through 01/05/2018

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 255 (last week 239) 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 5, 2018

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2018/01/weekly-statsheet-etf-tracker-newsletter-updated-01-04-2018/

 EXTENDING THE RALLY

 

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

Who cares what the news headlines say or that the just released jobs report was downright dismal. This year, anything appears to be bullish for the markets—so far. The major indexes posted record gains again for the 4th straight positive session in part supported by the tax package and a favorable outlook on earnings.

ZH summed up the week as follows:

  1. Record highs for S&P, Dow, and Nasdaq.
  2. Lowest VIX close ever.
  3. First time VIX has ever traded at or below 9.00 for 3 straight days ever.
  4. Nasdaq’s best start to a year since 2004.
  5. Near record streak for stocks to remain within 5% of all-time high ever.
  6. Individual investors’ highest stock exposure since 2000.
  7. Fastest yield curve flattening since 2007.
  8. Longest streak of complacency for risk ever.
  9. Longest winning streak for gold ever.
  10. Longest winning streak for global commodities ever.

As we’ve seen all week, after the opening bell rang, equities jumped higher and never looked back going up in pretty much a straight line. Our ETF candidates followed suit and rewarded us with another profitable session.

Leading the charge today was a tie with Aerospace & Defense (ITA) and Emerging Markets (SCHE) taking top honors with a gain +0.90% each. They were followed by Semiconductors (SMH +0.65%), Large Caps (SCHX +0.63%) and the Dividend ETF (SCHD +0.62%).

Interest rates rose a tad pushing the 20-year bond lower by -0.29%. Gold stayed about even, and the US Dollar (UUP) halted its losing trend by managing to eke out a tiny gain of +0.08%, which appears to be merely a temporary break on its way down to take out the 2017 lows made in September.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 01/04/2018

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, January 4, 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 +4.26% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Records Are Made To Be Broken

Ulli Market Commentary Contact

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

The move into record territory continued for the third straight day with the Dow climbing above its psychologically important 25k marker for the first time in history. Upward momentum remained strong throughout the session and into the close. Helping matters was the weakening of the VIX, which made history itself by trading with an 8 handle for the 2nd day in a row… a first in the history of stocks.

Our ETFs had a good day as well with all of our holdings closing in the green again. Leadership rotated a bit from yesterday as Financials (XLF) headed the group with +0.96% with International Equities (SCHF) taking a close 2nd with +0.91%. This was followed by Aerospace & Defense (ITA +0.69%) and Semiconductors (SMH +0.51%).

Gold had a record of its own, but not in price but by sporting a rebound rally that has now lasted 10 straight days, which equaled the record win streak of 7/18/2011. Interest rates headed south, but only by small margin leaving the 20-year bond (TLT -0.02%) essentially unchanged. Yesterday’s one-day bounce in the US Dollar (UUP) came to an end, as the downtrend resumed with UUP surrendering -0.33%.   

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