Bullish Mood Prevails

Ulli Market Commentary Contact

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

Despite sudden market weakness developing late in the session, with technology and biotech being spooked the most, the major indexes recovered a good chunk of their early gains and ended in the green with the Dow notching its 40th record close of the year. Helping matters were reduced tensions between N. Korea and the U.S. over the weekend.

In ETF space, Transportations (IYT) came roaring back and added a solid +2.21%. Taking second place with +1.74% was the Aerospace & Defense ETF (ITA) while Semiconductors (SMH) gained +1.39%. On the downside, the Dividend ETF (SCHD) suffered a -0.51% loss.

Gold retreated as well as interest rates rose with 10-year bond yield spiking 3 basis points to 2.23%. As a result, the 20-year Bond (TLT) lost -0.58%. The current slide in rates, which started the beginning of July and hit a low of 2.05% for the 10-year bond early September, appears to have reversed, but it’s too early to tell if it’s just a dead cat bounce or the beginning of a new major uptrend. The US dollar (UUP) followed suit and gained +0.25%.

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One Man’s Opinion: The Trouble With Asset Bubbles: If You Stop Pumping, They Pop

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By Charles Hugh Smith

The trouble with inflating asset bubbles is that you have to keep inflating them or they pop. Unfortunately for the bubble-blowing central banks, asset bubbles are a double-bind: you cannot inflate assets forever. At some unpredictable point, the risk and moral hazard that are part and parcel of all asset bubbles trigger an avalanche of selling that pops the bubble.

This is another facet of The Fed’s Double-Bind: if you stop pumping asset bubbles, they pop as participants realize the music has stopped, and if you keep pumping them, they expand to super-nova criticality and implode.

There are several dynamics at play in this double-bind.

1. The process of inflating a bubble (for example, the current bubbles in stocks and real estate) requires pushing investors and speculators alike into risky asset classes. This puts the market at increasing risk as everyone is pushed to one side of the boat.

2. Those on the other side of the boat (i.e. shorts) are slowly but surely eradicated as the pumping keeps inflating the bubble. When the bubble finally bursts, there are no shorts left to cover, i.e. buy stocks at lower prices to reap their profits.

3. As the bubble continues to expand, the money available to enter the market and keep prices rising declines. The very success of the pumping process strips the markets of new sources of new money, leading to a point where normal selling exceeds new-money buying and the bubble collapses.

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ETFs On The Cutline – Updated Through 09/15/2017

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 294 (last week 277) 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 September 15, 2017

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2017/09/weekly-statsheet-etf-tracker-newsletter-updated-09142017/

MISSION ACCOMPLISHED: S&P 500 CONQUERS ITS 2,500 LEVEL

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

As we have become accustomed to, news reports, that should affect markets negatively, were ignored as the major indexes continued relentlessly higher with the S&P managing, at the very last minute, to close above its 2,500 marker for the first time.

The latest N. Korean missile test was shoved aside as were economic reports that were anything but comforting. First, there were retail sales, which tumbled in August -0.2% MoM with, surprisingly, online sales slumping. At the same time, July’s gains were revised and cut in half. The August industrial production numbers crashed the most since May 2009 as auto sales collapsed. Completing the trifecta of bad reports was a slipping consumer confidence index.

ZH summed up this week best:

  1. Hurricane Irma crushes Florida
  2. North Korea test fires ICBMs across Japan (again)
  3. Economic data misses across the globe (China and US most notably)
  4. Terrorism in UK and France

And the result – drum roll please – new record highs for the Dow, the S&P, and the Nasdaq… with the Dow’s best week of the year! Go figure…

In ETF space, Semiconductors (SMH) took top billing today by gaining +1.32% with Emerging Markets (SCHE) occupying a distant 2nd place with +0.70%. On the downside, we saw only one red number and that was Transportations (IYT), which lost -2.00%.

Interest rates ended the day unchanged, gold slipped again, and the US dollar (UUP) lost -0.33% on the day but managed to eke out a gain for the week. Nevertheless, its YTD downtrend remains intact, and the loss is now over 11%.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 09/14/2017

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, September 14, 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 +2.77% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Weak Economic Data Keeps Markets In Check

Ulli Market Commentary Contact

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

While the Dow managed to close in the green for the 3rd straight session in a row, the broader market sagged a little based on weak retail shares that had the sector (XRT) giving back -0.72%. A couple of other numbers did absolutely nothing to instill confidence in an already declining economy.

Consumer prices jumped 0.4% MoM in August, which was the biggest spike since the beginning of 2017. YoY, the CPI still remains below the Fed’s goal of +1.9%, but that may very well change. Adding insult to injury were real hourly earnings, which plunged 0.6% last month—not exactly a combination that promotes the warm fuzzies when it comes to consumer spending.

In regards to our ETF holdings, gains and losses were just about equally weighted. Leading the pack were Aerospace & Defense (ITA) with +0.52% with Semiconductors taking second place with +0.44%. Closing modestly in the red were Transportations (IYT) and SmallCaps (SCHA) with -0.33% and -0.12% respectively.

Interest rates remained unchanged, but the 20-year Bond (TLT) managed to eke out a gain of +0.41% after 3 days of losses. The US Dollar (UUP) bucked its 3-day uptrend and gave back -0.29% while Gold (GLD) rose +0.44%.

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