ETF Tracker Newsletter For December 30, 2016

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ETF Tracker StatSheet

https://theetfbully.com/2016/12/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-12292016/

Market Commentary

Year End Resistance

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

For sure, I thought there would have been a last minute attempt at reaching the much talked about 20k Dow level during this last trading week of 2016, but it did not happen.

Actually, the post election momentum reversed with the S&P 500 declining for a third consecutive session but managed to gain 9.5% for the year thanks to Fed intervention back in February and mid-year during the Brexit drop.

Of course, the Trump pump in the face of rising interest rates helped the indexes big time, but it remains to be seen if there is any staying power once Trump takes over on January 20th when underlying economic realities are certain to surface along with the fact that his ambitious plans may run into opposition even within his own party.

Despite the market euphoria of the past 6 weeks, our main directional indicator, the Domestic TTI, see section 3 below for the latest update, did not play along by advancing only modestly indicating a lack of conviction due to a rising interest rate environment, which will eventually be negative for equities. Be sure to stay tuned for the latest updates as the New Year gets underway.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 12/29/2016

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ETF Data updated through Wednesday, December 29, 2016

TOC082516

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

ttiClick 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 +1.16% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Treading Water

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

Quiet holiday trading took over with the major indexes vacillating slightly above and below their respective trend line without clear direction and again on low volume. The exception was gold, which finished a 5-day winning streak by adding a solid +1.59% for the day.

The dollar gave back some of its recent gains and surrendered -0.52%, which was its strongest pullback since November 1st. Interest rates dropped with the 10-year Treasury now yielding 2.49% down from 2.6% early in December.

Oil slipped on a rise in inventories, weekly jobless claims fell and the preliminary reading for the trade deficit unexpectedly widened. There is only one trading day left this year for the Dow to reach the much anticipated and talked about 20k level, but right now that goal remains elusive.

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Rally Loses Steam As The Drive For Dow 20,000 Stalls

Ulli Market Commentary Contact

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

A broad decline in the major indexes interrupted the Trump rally as bad news was, for a change, perceived to be really bad news with the culprit being a drop in home sales. It was a sharp one as pending home sales plunged to their lowest level in almost a year. This should come as no surprise as the upswing in mortgage rates and not enough housing inventory kept potential buyers subdued.

If you look at the numbers on a year over year basis, the drop was the worst since August 2014 with only the Northeast seeing pending sales gains on both, an annual and monthly basis. NAR’s chief economist Lawrence Yun put it this way: “Already faced with minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”

Expect much more pain for housing, which as Mark Hanson noted recently is the least affordable it has ever been for buyers who need a mortgage in the coming months, which will promptly spill over into all other areas of the economy. In the meantime, the eagerly awaited Dow 20,000 remains out of reach.

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Edging Up On Low Volume

Ulli Market Commentary Contact

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

The major indexes managed to crawl higher today but hopes of the Dow taking out the 20,000 marker were dashed again with the index barely remaining above the unchanged line. For December 27th, today was the lowest volume day in over 10 years, which will most likely continue for the remainder of this week.

Consumer confidence went parabolic and shot up to its highest in more than 15 years, which is hard to believe considering the weak underlying fundamentals. But, then again it’s all based on hope that business conditions will strengthen in the future based on Trump’s infrastructure spending plan along with lower taxes and deregulation. Makes me wonder what might happen should the bloom fall off this flower unexpectedly…

In corporate news, Amazon reported that it shipped an amazing 1 billion items worldwide this holiday season calling it the best year they ever had.

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One Man’s Opinion: Foreigners are Dumping US Treasurys as Never Before

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OneMan'sOpinionBy Wolf Richter

All kinds of things are now happening in the world of bonds that haven’t happened before. For example, authorities in China today halted trading for the first time ever in futures contracts of government bonds, after prices had swooned, with the 10-year yield hitting 3.4%. Trading didn’t resume until after the People’s Bank of China injected $22 billion into the short-term money market.

What does this turmoil have to do with US Treasuries? China has been dumping them to stave off problems in its own house….

The US Treasury Department released its Treasury International Capital data for October, and what it said about the dynamics of Treasury securities is a doozie of historic proportions.

Net “acquisitions” of Treasury bonds & notes by “private” investors amounted to a negative $18.3 billion in October, according to the TIC data. In other words, “private” foreign investors sold $18.3 billion more than they bought. And “official” foreign investors, which include central banks, dumped a net $45.3 billion in Treasury bonds and notes. Combined, they unloaded $63.5 billion in October.

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