GDP Forecast Collapses; Are Stocks About To Follow?

Ulli Market Commentary Contact

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

One look at the above chart and you’ll notice something that we have not seen in a long time. After the indexes spent all day below the unchanged line, the usual late afternoon ramp, which we’ve become accustomed to for a long time, did not materialize as stocks took a another dive but were saved from worse by a last minute upturn.

To me, things look sort of dicey right now. A week ago, the Fed announced via its various mouth pieces that a rate hike was imminent meaning it was forthcoming during their March 15 meeting, as Fed chief Yellen seemed to confirm during last Friday’s conference. While we all know that the Fed behind the curve with their rate hike effort, I think they are caught between a rock and a hard place.

According to the Atlanta Fed, the GDP forecast was revised from 1.8% last week to just 1.3% today. That is a huge drop, especially in view of the fact that this number was more than double, or 2.7%, just one month ago. This confirms what I have been pounding on for quite a while, namely that economic conditions are weakening and not strengthening as MSM reports almost daily. That condition would exactly be the wrong time for a rate hike.

If you consider that inflation officially has accelerated to 2.5%, you can see that GDP is actually in negative territory, which means the economy is shrinking and not expanding. Makes me wonder if stocks are finally catching on to this bitter reality? We’ll have to wait a while longer to be sure that the tide has actually turned; right now it looks as though this could be the proverbial canary in the coalmine.

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Off The Lows But Still In The Red

Ulli Market Commentary Contact

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

The major indexes started out the week on a negative note, rallied off the lows but did not manage to climb above the unchanged line. Setting the sour mood were news reports from N. Korea over the weekend that they had fired four ballistic missiles into the sea northwest of Japan. That was followed by tumultuous news from the Trump administration along with lack of details regarding his economic plans.

Add to that setbacks in filling his Cabinet posts and accusations of Obama wiretapping Trump power during the later part of the election campaign, and you have enough reasons to cast some questions as to the longevity of the post-election rally. For sure, once markets figure out that the Trump economic initiative, as well meaning as it may be, will not be executed in the expected time frame, you may see more weakness creep in.

One of the things discussed over the recent past was the question as to whether the entire Fed stimulus program of trillions of dollars over the past 8 years benefited Wall Street or Main Street. We just got the answer. Take a look at this chart:

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One Man’s Opinion: US Government’s 2016 Net Loss “More Than Doubled” To NEGATIVE $1 Trillion

Ulli Market Review Contact

By Simon Black

Every year around this time the US federal government releases an annual financial report to the public.

It would be hilarious if the numbers weren’t actually true.

Just like Apple or Exxon, the government’s annual report contains several important financial statements and detailed commentary about their finances and operations.

But unlike Apple, Exxon, the government can’t manage to turn a profit. Ever.

According to this year’s report, the government’s net loss “more than doubled, increasing $533.2 billion (103.7%) during [Fiscal Year] 2016 to $1.0 trillion.”

It’s extraordinary that they lost $533 billion in 2015, let alone a full trillion in 2016.

Bear in mind, there was no major wars, recessions, or crises to fight.

What did you really receive in exchange for that trillion-dollar loss?

Brand new highway system? Giant tax rebate?

Nope. None of the above.

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ETFs On The Cutline – Updated Through 03/03/2017

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 239 (last week 246) 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 March 3, 2017

Ulli ETF Tracker Contact

ETF Tracker StatSheet

https://theetfbully.com/?p=18573&preview=true

Clawing Back Above The Line

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

As we all know, you never get a straight answer from the Fed in regards to interest rates. Today was no exception as Fed head Yellen signaled that they are set raise rates this month, but they kept their options open via: “if employment and other economic data hold up.” Wall Street took that as an affirmative and rate hike odds ended up in the 95% area.

She added that “rates are likely to rise faster this year as the economy appears clear of any imminent hurdles at home or abroad for the first time in her tenure.” That is strange, because I see and have reported on weakening and not strengthening hard economic data points and simply can’t see a justification for a rate hike other than the Fed having cried “wolf” too many times.

Benefiting from higher rates are financial stocks, which were up +0.4%, while real estate was the worst performer with -0.4%. Interest rates were higher with the 30-year yield touching the 3.15% level twice before pulling back.

The S&P 500 and the Nasdaq closed out their 6th straight week of gains despite Thursday’s sell-off. As we have become accustomed to, the markets were down for most of the day, but thanks to the well-known last hour end-of-day acrobatics, the indexes were pushed above the unchanged line.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 03/02/2017

Ulli ETF StatSheet Contact

ETF Data updated through Thursday, March 2, 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 +2.95% after having generated a new Domestic Buy signal effective 4/4/2016 as posted.

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