ETFs On The Cutline – Updated Through 12/23/2016

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 191 (last week 206) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line 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 December 23, 2016

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/2016/12/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-12222016/

Market Commentary

Wall Street Takes A Breather

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

The major indexes moved in a tight trading range today and for most of the week with the S&P 500 adding 6 points over the past 5 trading sessions.

I found today’s two economic data points more confusing than clarifying:

There is an odd divergence in the latest UMichigan consumer sentiment print: on one hand, the December index of Consumer Sentiment rose from 93.8 in November to 98.2, up from the preliminary 98.0 print, even as long-term inflation expectation, those in the 5-10 year bucket, dropped from 2.50% to 2.30%,a new all time low print.

 hich is odd, because the very reason for the surge in confidence is due to the recent spike in the market, driven higher by expectations or rising inflation, something which apparently has not filtered through to ordinary US consumers, who instead are hoping to have their Dow Jones 20,000 hat, while basking in the glow of dropping prices and a “deflationary mindset.”

And then this:

Soaring homebuilder confidence, crashing mortgage applications, spiking mortgage rates, weak pending home sales, strong existing home sales, and now new home sales for November surged 5.2% MoM (smashing expectation of a 2.1% rise). Take your pick of the US housing ‘recovery’ narrative.

The effect on the markets was non-existent with most traders having already left for the holiday leaving only the surprisingly subdued algos in charge.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 12/22/2016

Ulli ETF StatSheet Contact

ETF Data updated through Wednesday, December 22, 2016

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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 +1.24% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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Dow 20,000 Still In Sight

Ulli Market Commentary Contact

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

The major indexes never managed to crawl above the unchanged line during today’s session in part caused by weakness in retailers. Stocks fell after reports that Trump’s transition team is mulling over a possible 10% tariff on imports with the Consumer Discretionaries losing over 1% for the day, their largest one-day decline since October.

We have reached a point in the markets where the post-election gains seem to have made them very expensive considering that all is based on hype and hope. What happens if Congress ends up not just watering down some of Trump’s ideas but rejects others outright?

To be realistic, we really need to see first what will actually get passed before these recent gains can be justified. Speaking of those gains, they were not broad based when looking at it from a global basis, but more focused on U.S. equities while bonds, at the same time, got hammered. The following chart makes this abundantly clear:

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Finishing In The Red

Ulli Market Commentary Contact

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

The major indexes pulled back for a change as volume and the hunt for Dow 20,000 slowed down ahead of the Christmas Holiday. Healthcare and real estate were the primary losers today.

Banking stocks in Europe round-tripped this morning as the shares of Italy’s problem child, Monte Paschi, crashed, soared and plunged again amidst on-again, off-again bail-out headlines. It now appears that the bloodletting has also spread to Spanish banks following a court ruling against them for mortgage fraud.

I think these EU problems are just the beginning, so it’s important to note that the consequences of Italy’s banks owning $360 billion in non-performing loans will spread at some point to France and Germany and subsequently make it across the pond to the U.S. While this may not be imminent, it’s something to keep an eye on.

After some of the investment heavyweights like Bill Gross and Jeff Gundlach have been commenting in regards to the reckless post-election rally with things like “there is going to be a buyer’s remorse period,” it was El-Erian’s turn today agreeing that “now is a good time to take advantage of the latest rallies in global financial markets and scale back from risk,” along with “it makes total sense to take some money off the table.”

I especially liked his viewpoint that “We’ve priced in no policy mistakes. We’ve priced in no market accidents, and we’ve ignored all sorts of political issues.”  So, let me be the voice of reason again, just as the Dow may make another attempt at breaking the 20,000 barrier, and point out the importance of having a sell stop discipline in place.

Bob Farrell’s market rule #2 says it best: “Excess in one direction will lead to an opposite excess in the other direction.”

Just be prepared.

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Almost Reaching Dow 20,000

Ulli Market Commentary Contact

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

The recklessness and utter abandon with which the markets have been rallying, since the election, is simply astounding. Caution, risk aversion or view of economic fundamentals do either not exist or are simply ignored. It is financial engineering combined with market manipulation at its finest.

Such was the case again today as the Dow attempted to breach the 20,000 level but failed; however, the dollar kept on chugging along and rose to its highest levels in 14 years, which is not a good thing for companies involved in exports due to them possibly being priced out of some markets. About 40% of the S&P 500 members are selling internationally and any possible fallout will sure be known over the next two quarters.

Wall Street’s focus and the main driver of this rally remain fixed on one thing and one thing only: The Trump agenda with its tax cuts, infrastructure spending, deregulation and the subsequent anticipated boost to businesses.

In the end, it’s nothing but hope with 2017 economic growth expectations remaining stuck near cycle lows as the chart shows:

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